Chainlink's Role in Building The Future of Onchain Finance | Sergey Nazarov at HK FinTech Week 2024

Great to be here. Thank you. Thanks for having me.

I think the size of the Hong Kong market and the volume that the Hong Kong market commands is the biggest in Asia. I think that the digital asset trend is reformatting volume into the blockchain format. So just logically, if you do a basic calculation and ask yourself, if I take a market and I believe that 10 or 20% of the assets or the volume or the transactions will be in a blockchain format, what's the most attractive market for me in Asia? Just by the very basic arithmetic, Hong Kong is the most attractive market, just because the numbers are there. The other thing that's attractive about Hong Kong is the regulatory regime, how open-minded and forward-looking the regulatory agencies and their representatives are, and how much guidance has been released by them in favor of stablecoins and various innovations in the digital asset space. So now you have two very strong factors: big market, very open, forward-looking, progressive regulatory regime. That's two very powerful pros. And then you have a third big factor that I think about a lot, which is all the money in China that has historically found its way into the Hong Kong market under a set of controls and limitations, but it's still an immense amount of money. I think the current system sees Hong Kong as the natural place for that money to flow. So you're not even talking about the money that is in the system now; you're talking about possibly more money from mainland China flowing into the Hong Kong financial sector. All three of these things are very powerful, inescapable forces in favor of Hong Kong's position as a digital asset hub. From the conversations I've had with people in Hong Kong, the concept of being a hub is important, and I think this direction towards a hub is something Hong Kong is going to pursue and be successful at.

One of the big advantages of blockchains, especially in the public chain world, is that they're inherently global. One of the reasons that DeFi, various tokens, cryptocurrencies, and tokenized financial products have grown so quickly is because when you launch a financial product in the traditional world, you have to launch it in that specific market only to those people in that market only. So your market size is constrained. When you launch a financial product or a cryptocurrency or a token onto a public chain, you have a global market. Now, the thing that's been missing from that global market is the value that is stuck in institutions, sometimes in very traditional formats. The challenge then is: how do you take the global nature of blockchain technology and extend it to be accessible to traditional financial institutions and their users? How does a traditional financial institutional user in Dubai purchase a token generated in Hong Kong under your framework, and how do they do that from a regulated institution? And then how does an institutional user in Hong Kong purchase some token in some other jurisdiction and bring it back into their wallet or into their institution in Hong Kong? That is where the crypto industry goes from being about 2.5 to 3 trillion to the tens of trillions in value: when all of that institutional capital that's locked in existing systems is able to enter and interact with blockchains. What we fundamentally do is unlock all of that capital to move in and out and between blockchains by creating connectivity between the blockchains and between the institutional systems and blockchains. The first problem you're going to have is: how do I get my institution's system to make an account on a chain, to generate a transaction, to move value from a user account into a blockchain account? And then the second problem will be: how do I interact with multiple chains? Then you'll have a lot of other problems along the way, like identity problems, market data problems, all kinds of data and identity and connectivity problems, all of which we solve also. So the real challenge for us is not just continuing to power the majority of DeFi. We already power the majority of the DeFi trend, and Chainlink has grown the DeFi trend from sub-100 million to over 200 billion throughout that time, from the beginning until now, powering the majority of DeFi and continuing to power the majority of DeFi. But even if DeFi is a 100 billion, 200 billion, 300 billion, or 500 billion market, in the wider scheme of the financial industry, that's really not big enough. The only way that DeFi, public chains, real world assets, and all of these innovations that we're so excited about go to the next level is by users of HSBC, users of Hang Seng Bank, users of large institutions being able to put their value into those financial products securely and efficiently. That's kind of the next stage of our industry for it to really grow. So that's the project we've undertaken.