Is Web3 the Future of Finance and Digital Ownership?
A recent art auction shook up the world of digital assets, highlighting the burgeoning potential of Web3 technology. Chinese entrepreneur Justin Sun made headlines by purchasing Maurizio Cattelan’s controversial "Comedian"—a banana taped to a wall—for a staggering $6.2 million, using cryptocurrency and blockchain technology to seal the deal. Synonymous with innovation and decentralized power, this purchase illuminates a larger trend: the rise of Web3, a revolutionary shift in how we interact with the internet.
Unlike Web2, where tech giants control data and algorithms, Web3 envisions a decentralized world where users own and control their digital identities and assets, creating a "value network" that could fundamentally reshape industries. The implications for the creator economy are particularly profound.
Sun Xiaohan, a partner at Shanghai Hongguan Asset Management, believes Web3 could significantly benefit creators by allowing them to retain a larger share of the revenue generated from their work. “In 2021, Web3 platform OpenSea distributed $3.9 billion to 22,400 creators, with each earning an average of $174,000," said Sun. "In stark contrast, the average YouTube channel received only $2.47." This gulf in earnings exposes the limitations of Web2’s monopolistic model, where platforms often take the lion’s share of profits.
Beyond Creators: Tokenizing Real-World Assets
Web3’s transformative potential extends beyond the creator economy, venturing into the realm of traditional finance. By tokenizing real-world assets (RWAs), Web3 is creating entirely new financial markets. Transforming physical assets into digital tokens unlocks unprecedented liquidity, transparency, and efficiency, with the potential to revolutionize the global financial landscape.
“Tokenization has the capacity to revolutionize asset management and increase market liquidity," stated Wu Xiaochuan, CTO of Hong Kong Digital Asset EX Limited. Recognizing these possibilities, global fintech powerhouse Hong Kong is actively developing regulatory frameworks to accommodate virtual and tokenized assets, paving the way for decentralized finance (DeFi).
China’s Web3 Landscape: Innovation Meets Regulation
Shanghai is quickly establishing itself as a major blockchain hub, exploring over 100 potential applications for the technology. The city’s Tree-Graph Blockchain Research Institute partnered with China Telecom to develop a groundbreaking Blockchain SIM card (BSIM), providing access to Web3 and the Metaverse.
This collaboration underscores the increasing integration of blockchain into mainstream industries.
Navigating the Challenges: Regulation and Risk
Despite its promise, the path to widespread Web3 adoption is not without hurdles. Regulatory uncertainty, security vulnerabilities, and market volatility remain significant challenges. As highlighted in the "Financial Regulatory Blue Book: China Financial Regulation Report (2024)," the crypto market is particularly susceptible to systemic risks stemming from high leverage, unregulated risk-taking, and fraud.
This report, co-released by the National Institute for Finance & Development, the Institute of Finance & Banking of the Chinese Academy of Social Sciences, and the Social Sciences Academic Press, emphasizes the nascent stage of China’s crypto market and the stringent regulations in place to mitigate these risks. These concerns reflect a broader global apprehension about the volatility of digital assets. Globally, regulators are taking action to foster a stable environment for Web3. The European Union’s MiCA (Markets in Crypto-Assets) regulation aims to establish a unified framework, protecting investors while encouraging innovation. Similarly, the US Securities and Exchange Commission (SEC) focuses on regulating Initial Coin Offerings (ICOs) and tokenized securities, ensuring compliance with existing financial regulations.
Legal Scrutiny and Transparency
Sun’s purchase of "Comedian" sparked debate, with some speculating that he was utilizing cryptocurrency for money laundering or to promote his own platform.
"The legality of cryptocurrency as a payment method remains contentious, with the risk of circumventing regulatory oversight," noted renowned criminal defense lawyer Fu Jian. Chinese law does not currently recognize cryptocurrency as a valid payment method for such transactions. Furthermore, international treaties and national laws governing import/export controls and tariffs come into play for cross-border art transactions.
It is important to note that last year, the SEC charged Sun and three of his companies with the unregistered offering and sale of cryptoassets, including Tronix (TRX) and BitTorrent (BTT). The SEC also alleged Sun manipulated the secondary market for TRX through wash trading and orchestrated a scheme to pay celebrities to promote TRX and BTT without disclosing their compensation.
A Future Forged in Regulation
As Web3 technologies continue to evolve, the regulatory landscape will be crucial to its long-term viability and integration into global financial markets. Striking a balance between fostering innovation and mitigating risks will determine whether Web3 can achieve mass adoption and reshape the future of finance and digital ownership.
## Is Web3 the Future of Finance and Digital Ownership?
**World Today News sits down with leading expert Sun Xiaohan, partner at Shanghai Hongguan Asset Management, to explore the compelling opportunities and challenges posed by Web3.**
**World Today News: The recent sale of Cattelan’s “Comedian” for $6.2 million using cryptocurrency highlights the growing influence of Web3 in the digital art sphere.
Do you believe this signifies a larger shift towards decentralized ownership and control in the digital space?**
**Sun Xiaohan:** Absolutely. This sale transcends simply being an art transaction. It’s a powerful symbol of the evolving landscape of digital ownership. Web3 empowers creators and collectors by enabling direct, transparent transactions without intermediaries taking a important cut.
This model shifts power dynamics, allowing creators to retain greater control over their work and monetize it directly. We are witnessing a fundamental transformation in how value is created and exchanged online.
**World Today News: There’s a significant difference in income generated by creators on Web3 platforms compared to traditional platforms like YouTube.How significant is this difference, and what does it mean for the future of the creator economy?**
**Sun Xiaohan:** The disparity is striking. As mentioned before, OpenSea, a leading Web3 marketplace, distributed $3.9 billion to creators in 2021, with each earning an average of $174,000. In stark contrast, the average youtube channel earns a meager $2.47.
This illustrates the limitations of the centralized, platform-dominant model of Web2, where creators often struggle to monetize their work effectively. Web3 presents a more equitable and sustainable model, empowering creators to build direct relationships with their audiences and retain a larger share of the revenue they generate.
**World Today News: Beyond the creator economy, Web3 is being explored for its potential in tokenizing real-world assets (RWAs). Can you shed light on how this could revolutionize traditional finance?**
**Sun Xiaohan:** Tokenization of RWAs has the potential to fundamentally reshape finance as we know it. By representing physical assets as digital tokens, we can unlock unprecedented liquidity, openness, and accessibility. imagine tokenizing real estate,art,or even intellectual property.
This would enable fractional ownership, allowing smaller investors to participate in markets previously inaccessible to them. It also streamlines processes like cross-border transactions and asset management, making the entire system more efficient.
**World Today News: Hong Kong is actively developing regulatory frameworks to accommodate Web3 and decentralized finance (DeFi). What are the key challenges and opportunities for jurisdictions like Hong Kong in navigating this rapidly evolving landscape?**
**Sun Xiaohan:** Hong Kong has demonstrated foresight by embracing Web3 and DeFi, recognizing the immense potential for economic growth and innovation.
The challenge lies in striking a balance between fostering innovation and ensuring adequate consumer protection and financial stability. Establishing clear regulatory guidelines that provide legal clarity for participants while mitigating risks associated with this relatively new technology is crucial. This will attract investment,build trust,and ultimately position Hong Kong as a global leader in the Web3 space.
**World Today News: How do you see China’s Web3 landscape evolving in the coming years? What role will innovation hubs like Shanghai play?**
**Sun Xiaohan:** China is demonstrably committed to blockchain technology and Web3. Shanghai’s emergence as a blockchain hub, coupled with advancements like the Blockchain SIM card, highlights the country’s focus on integrating this technology into mainstream applications.
We can expect to see further advancements in areas like digital identity, supply chain management, and decentralized finance.China’s success in fostering a thriving Web3 ecosystem will depend on its ability to balance technological progress with regulatory oversight,ensuring a secure and sustainable environment for innovation to flourish.
**World Today news: Thank you for sharing your insights, Mr. Sun. The potential of Web3 is undeniable, and we eagerly anticipate witnessing its transformative impact on various sectors in the years to come. **
