This article is a translation of a speech given by Professor Wang Yang, Vice President of the Hong Kong University of Science and Technology (HKUST), at the inaugural event of Hashkey New Vision. In his speech, Professor Wang discussed the ban on cryptocurrency mining in China and its resulting capital and tax outflows, which he finds regrettable.
Professor Wang Yang is an internationally renowned scholar who has served as Vice President (University Advancement) of HKUST since October 1, 2020. He is also a professor in the Department of Mathematics and has published over 100 research papers in the fields of pure mathematics and interdisciplinary mathematics, many of which have been featured in leading scientific journals. During his tenure as Dean of the School of Science and Head of the Department of Mathematics, Professor Wang established the Big Data Bio-Intelligence Laboratory at HKUST and launched a popular Master’s program in Data Science and Technology.
He has conducted extensive research on the blockchain industry in China and made recommendations on the relationship between Bitcoin and the ban on mining in China at the Hashkey New Vision event.
The following is the full text of Professor Wang’s speech:
“In 2012, I flew from the United States to Hong Kong, and then to Shanghai. I had a friend of over 30 years, who was not yet 30 at the time. He picked me up at the airport, and he was actually my student. He told me that he was now interested in Bitcoin and suggested that we do something together. At that time, I thought Bitcoin and blockchain were scams, so I didn’t pay much attention.
In 2014, I came to Hong Kong again, and he picked me up again. He said there was a young man who was very smart and suggested that I learn about it. I still held the same view at that time, thinking that these were all scams. But later, they found Xiao Feng. I realized that I had missed two very good opportunities, a painful lesson that has brought me to today. Now, because I missed these two very good opportunities, I always feel that I am not qualified to tell everyone what to do in the future.
But I think in recent years, I have become more familiar with this circle, and I often communicate with the government on policy matters, but they may not always like to listen to me because I always feel that their efforts are too small.
From another perspective, I think Hong Kong’s pace in serving this industry is too slow. We seem to be satisfied with the status quo. Hong Kong should have a higher goal, determination, or even a belief, to lead the development of the entire region, including the future direction of blockchain technology. I have been discussing this recently, for example, the development of digital currency. I believe that regardless of the outcome of the China-US trade war, pure digital asset markets like Bitcoin will definitely exist and may become even larger. But we should not be satisfied with the current stage alone. I believe that the ultimate prospects of the economy need to be integrated with the real economy, which is a rigid demand.
From any perspective, this is a rigid demand for China as well. For example, Huawei has become China’s largest beef supplier. Why is that? Transsion, a very successful mobile phone company in Africa, may be known to many people. But how many people know that Transsion is also China’s largest coffee supplier? This is because the local currency is easily devalued, and they use currency data to purchase beef, which is a hard currency.
I have had discussions with many trade departments in China, including visits to Yiwu. For example, only half of the money from goods sold in Yiwu can be collected in RMB or hard currency, and the rest are local currencies that are not valuable. The problem we face is how to use these currencies. Argentina has things that China needs, such as lithium ore and beef.
So here is a problem. In my opinion, future development is very important. I often bring it up at the government level, but it is not always accepted. But I think the integration of the real economy through digitization is an important condition for the development of the next generation. Of course, there is also the integration of artificial intelligence, in which we are also doing well.
These futures have directions for development, but this direction requires more forward-thinking, while also considering how to seamlessly connect decentralized technology with regulation on the chain and share it with the regulation of the real economy. This is actually very good, but because it is challenging, as some people say, we send people to space because it is difficult. It is the same for Hong Kong. We should have a simpler way to go beyond the region that is already profitable. What to do next, I feel that this is a question that needs to be discussed separately.
I think that since October 31, 2022, Hong Kong’s progress in related policies has been slow, and I hope that the speed can be accelerated. Currently, the challenges we face include a shortage of talent, especially professionals in the approval field.
I have also noticed that our system itself has problems. For example, when discussing the digital economy, I once had a conversation with a government official and learned that there were nearly 50 people on the member list of a government committee. There was a study in the United States that said if a committee has more than 7 people, for every additional person, their efficiency decreases by 15%. With 50 people, your efficiency is 0.85 to the power of 43, which is almost 0. Therefore, I believe that we need reform to avoid formalism.
Regarding talent cultivation, HKUST has always been making efforts. We encourage students to collaborate with the industry, propose projects independently, and form teams. HashKey has provided a lot of support to our students, and we also hope that Futu Securities can provide support.
I was pleasantly surprised to find that our young people are highly creative. Some students may not have good academic performance, but when they encounter projects they are interested in, they will go all out and invest great passion.
However, there is still room for improvement in Hong Kong’s emphasis on cultivating innovation. The development of Web3 not only requires funding but also the establishment of a good ecosystem, good policies, and the attraction of talent. Currently, Hong Kong’s talent programs mainly focus on high-level talents and overlook the importance of mid-level talents. We suggest that a complete Web3 ecosystem should be built by attracting a large number of talents, rather than relying solely on traditional models that rely on large capital investment.
In fact, after a new round of cleanup, I think it is very difficult to completely eliminate unlicensed institutions. If I don’t do business for Hong Kong citizens in Hong Kong, there is no reason to expel citizens, right? I think they should definitely not be expelled. In a sense, these people will also bring some vitality to Hong Kong’s virtual asset ecosystem.
But for your question just now, I don’t really have a good answer. I have had conversations with some leaders, and I think a complete ban on mining is a very unwise move because the ultimate result is that the miners will be driven to the United States or elsewhere. US media has published articles stating that this is a $4 billion tax windfall because these people, after going to the US, contribute to tax revenue.
Personally, I have a point of view. I said at that time that you should not drive them away. Instead of worrying about capital outflows and other issues, why not let state-owned enterprises mine or invest in mining? For example, each mining farm should have at least 20% participation from state-owned enterprises. This would solve the problem and ensure risk control. Of course, this is already in the past.
I think there is still a very big problem now, which is that as soon as cryptocurrencies are mentioned, it immediately becomes a situation that is difficult to control. But China’s strategy may really need to take this path. Personally, I think if Trump comes into power, China will need to reevaluate all these policies in a very short period of time.
At this time, it is not possible to stop China’s trade just because there is a threat. So China must have a bottom line thinking. Of course, China is now developing socialism and its own system at this stage, but this quantity is currently not much. In the next step, especially in the development of countries along the “Belt and Road,” it will ultimately take the path of RWA tokenization. Through RWA tokenization, if everyone can truly realize its importance, it may not be completely useless.
If so, I think the market will open up. I think a breakthrough will occur in about three years, and people may rethink what digital assets are and whether we should embrace them. This is my personal prediction. However, I have also predicted that Bitcoin is a scam, so take it as a reference.
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