Effective communication is key to winning hearts and minds of investors
In late 2022, the Hong Kong government unveiled a range of policy measures aimed at developing the virtual asset industry, including legalising retail participation with a new licencing regime and allowing exchange-traded funds (ETFs) with exposure to Bitcoin futures. The government recognises the potential of distributed ledger technology and Web 3.0 to become the future of finance and commerce and believes that the innovative technologies behind virtual assets offer huge potential for applications in financial services, trade and enterprise services.
The move marked a major change in the government’s approach towards virtual assets, which until recently were only allowed to be traded by individuals with a portfolio of at least HKD 8 million (£820k). The city’s crypto plan includes a mandatory exchange licensing regime due from 1 June 2023, and officials have also permitted ETFs investing in Bitcoin and Ether futures. Three such ETFs launched since mid-December 2022 have so far raised over USD 80 million.
Meanwhile, a consultation is due in the first quarter 2023 on safeguards and allowable tokens for retail buyers. Officials are also willing to review property rights for tokenised assets and the legality of the automatically executing, software-based smart contracts that are key for many blockchain-based financial services. Then in February, Hong Kong issued the world’s first government tokenised green bonds worth USD 102 million, with the offer attracting strong investor interest. The success of the tokenised green bond demonstrated Hong Kong’s strengths in combining the bond market, green and sustainable finance as well as fintech, paving the way for digital bond offerings in the city.
These developments come as more Asian markets recently announced that they are establishing and/ or reinforcing their cryptocurrency regulations, including Thailand, India and Australia, while Indonesia said back in January that it was looking to set up its own cryptocurrency exchange within the year.
However, decentralised finance and blockchain technologies have suffered a blow to their reputations of late, which will require a lot of education and trust-building as the industry begins the recovery process. As such, with regional investor appetite for emerging crypto strategies increasing, it is vital that crypto companies communicate their long-term goals and put forth a public image that matches the promise of their technology, if the industry is to build back its reputation.
This can be done by contributing educational content to publications both inside and outside the ecosystem. Yet with crypto being relatively new, even sophisticated investors may not have a firm grasp of its fundamentals, and although accredited investors may be the primary target, that does not necessarily mean they understand the basics of crypto’s value proposition. Therefore, the challenge is to communicate that value proposition, and the risks to be aware of, in a way that is efficient, interesting and easily understandable.
And while crypto has its opponents and critics, data suggests that cryptocurrencies and cryptocurrency-powered financial applications are here to stay, and the rapid growth of interest and large sums that are being poured into this space suggests that banks and other traditional financial institutions, and not just fintech, should be looking for ways to embrace this technology.
Some banks, as well as major hedge funds and sovereign wealth funds, are already invested in cryptocurrency and blockchain companies. However, the financial industry has been traditionally slow to adapt, and is lagging behind when it comes to moving with the times and reclaiming the space. The most important thing for financial services firms is to understand what crypto is and what it can and cannot do. Crypto is probably one of the most disruptive technology innovations of our generation, but that does not mean that it will revolutionise every part of the value chain.
To help potential customers understand solutions based on the blockchain, the technology behind it needs to be explained first. Awareness of its many advantages and benefits must be raised and only then can the business and its products be promoted effectively. That is why crypto projects must invest their resources wisely and concentrate on their target audience – even if this means starting with only one or two main communication channels to get the message across.
Truly innovative crypto projects are happening right now: blockchain solutions for fintech companies, smart contracting, innovative payment systems, and online security systems are quietly developing a completely new economic sector.
For those involved in the crypto and decentralised finance markets, now is the perfect time to start engaging with the media. In recognition that these topics are becoming more prevalent, mainstream media outlets now employ full-time crypto reporters, and those reporters need credible and trusted resources to help them make sense of the crypto space.
As communications advisers, we can not only help boost the profile of these businesses through the media, but we can also help crypto companies navigate what will be a shifting regulatory landscape. The establishment of an integrated comms strategy is integral for giving these businesses a solid foundation to capitalise on when new regulations come into effect, ensuring they are positioned as a leader in the space from the off, rather than a challenger snapping at heels.