The blockchain infrastructure company Chainlink made a strong case for blockchain-driven finance at its first Hong Kong event, SmartCon 2024. This yearโs two-day conference at the Kerry Hotel in Hung Hom saw over 2,000 people. It marked one of the Web3 gatherings Hong Kongโs government actively brought to the city to solidify its position as a virtual asset hub. The event, a part of Hong Kongโs larger FinTech Week, aligned with other major discussions at AsiaWorld-Expo about the future of finance driven by Web3 and blockchain.
Hong Kongโs push for blockchain in finance
Joseph Chan Ho-lim, undersecretary for financial services and the treasury, delivered the opening remarks, underscoring Hong Kongโs potential as a bridge between virtual assets and traditional finance. Despite some momentum slowing this year, Chan affirmed the cityโs commitment to the field: “Hong Kong is uniquely positioned to link virtual assets to traditional financial instruments.โ He praised Chainlinkโs recent technological progress, particularly its cross-chain interoperability protocol (CCIP), which has begun to gain traction among traditional finance institutions.
Chainlink has collaborated with Swift, the Society for Worldwide Interbank Financial Telecommunication, for several years to facilitate blockchain transactions on Swiftโs global financial messaging network. Next year, banks will trial digital asset transactions over Swift, a notable step in merging blockchain and traditional payment systems.
Chainlink co-founder Sergey Nazarov highlighted the progress in connecting payment flows like Swift with blockchain networks. He noted that central banks are becoming more receptive to integrating their blockchain systems, stating, โI think, in the end, itโll be a mix of interconnected central bank chains and existing payment systems like Swift working together.โ
Financial landscape shifts amidst geopolitical developments
Blockchain-based finance has come under fresh scrutiny this week due to concerns over its potential to bypass sanctions. Russian President Vladimir Putin referenced a cross-border blockchain project, mBridge, involving the central banks of Hong Kong, mainland China, Thailand, the United Arab Emirates, and Saudi Arabia. He suggested that similar technologies could be used to evade international sanctions, prompting central banks to consider halting the project.
The Bank for International Settlements (BIS), which initially supported the mBridge project through its Innovation Hub in Hong Kong, confirmed it would step back from the initiative. At the Santander International Banking Conference in Madrid, BIS General Manager Agustin Carstens clarified that the departure needed more political motivation. โThe BIS is leaving the project not because of political considerations but because it is now at a point where the partner banks can continue independently,โ he stated.
Unlike mBridge, which operates as a single blockchain, Chainlinkโs system allows multiple blockchains to connect, facilitating transactions across different networks. Nazarov emphasised that Chainlinkโs system includes mechanisms to verify identities and avoid usage by sanctioned entities. โWe have systems that work with various identity platforms, but these external systems also need to be reliable,โ he said.
Collaborations and regulatory challenges
This yearโs SmartCon saw sponsorship from several blockchain innovators, including 1inch, a decentralised finance aggregator known for finding optimal cryptocurrency exchange rates. Inspired by Bruce Leeโs famous โone-inch punch,โ 1inch announced a collaboration with Leeโs family to celebrate his legacy.
In light of regulatory challenges, 1inchโs CEO Sergej Kunz highlighted the importance of legal compliance. โYou canโt regulate decentralised platforms the same way as centralised exchanges,โ he said, stressing that 1inch consults legal experts to ensure compliance. Kunz also advocated for increased collaboration within the Web3 community to establish compliant frameworks.
Chainlinkโs Nazarov shared a confident outlook, pointing to financial institutions’ inevitable integration of blockchain technology. โEventually, large institutions will have to use blockchain,โ he explained. โWhen more assets go on-chain, theyโll have no choice but to interact with them. Itโll be as essential as using email to communicate with clients.โ
Chainlinkโs SmartCon 2024 reinforced Hong Kongโs ambition to bridge virtual assets and traditional finance by setting the stage for significant blockchain finance discussions. As Web3 and tokenisation continue to gain attention, blockchain technology stands poised to reshape the financial sector despite its regulatory and geopolitical challenges.
