Interviewer: Alma, Founder of Techub News
Interviewee: Wu Chen, Co-founder of EX.IO
Content Organizer: Peter, Techub News

In the rapidly changing digital asset market, compliance has become the key to competition among global exchanges. As Hong Kong's regulatory environment gradually clarifies, a new batch of compliant exchanges like EX.IO is emerging in the market. As the co-founder of EX.IO, Wu Chen leads the team to find its unique position in a fiercely competitive environment. We are fortunate to have an in-depth conversation with Ms. Wu Chen to discuss the growth journey of EX.IO, strategic planning, and how to stand out in intense competition.

Alma: Thank you, Ms. Wu Chen, for accepting the interview! It’s been a while since we last met. When I first got to know you, you were looking to create an on-chain OTC market, right? Later, you shifted to the compliant licensed exchange EX.IO. At that time, OSL and HashKey had already obtained licenses, and compliant exchanges faced many challenges. Why did you choose this seemingly difficult path? Additionally, could you introduce the background of the EX.IO team and how you plan for future development?

Wu Chen: Thank you for your interest in our brand journey! The birth of EX.IO stems from my experience at Huasheng Securities. After leaving Huasheng, I went all in on Web3 and participated in the startup work of a Web3 project. At that time, friends in the traditional finance circle did not understand and thought Web3 was unreliable. However, after the Hong Kong government released its declaration to embrace Web3, market enthusiasm surged. In February 2023, the Hong Kong Securities and Futures Commission (SFC) issued guidelines for compliant exchange applications, and brokerages like Futu, Tiger Brokers, and Huasheng planned to enter this field. Leveraging our connections with Huasheng, we decided in April 2023 to separate the centralized part of my original project and focus on building a compliant virtual asset exchange.

Regarding the team, our core members can be said to bridge Web2 and Web3. I have over ten years of experience in the traditional financial bond market, the CSO has been deeply involved in Web3 since leaving traditional finance in 2019, and the Deputy CEO also has rich experience in the Web3 industry. We are a cross-disciplinary combination of Web2 and Web3, which has attracted investors like Huasheng Securities, Longling Capital (Cai Wensheng), and Weixin Jinke. They are optimistic about the trend of compliance, believing that mainstream capital will enter Web3 through compliance, and our team's professionalism and cross-disciplinary capabilities can seize this opportunity. In January 2024, we submitted a license application under the "xWhale" brand, and after approval in June, we renamed it EX.IO. The support from investors and our deep understanding of compliance allowed us to stand out among over 140 applicants, becoming one of the first four licensed under the Deem arrangement.

Alma: EX.IO has been preparing for nearly two years. What challenges have you faced?

Wu Chen: There have been too many challenges! The SFC team is very professional, and their review is meticulous down to every detail of the custody plan, such as requiring both hardware and software to obtain international certification, even specifying every algorithm used in the encryption machines. The regulators place particular emphasis on anti-money laundering and investor protection, ensuring that the network security and custody security of VATP are foolproof.

Alma: Since you and the SFC are both professional teams, why is the application process still so long, and why does business progress seem slow?

Wu Chen: This actually reflects the high expectations and pressure that society places on regulatory bodies like the SFC. Cases like the JPEX incident, which theoretically fall outside the SFC's regulatory responsibilities, still end up being addressed by the SFC. This phenomenon leads to a general state: when the industry is thriving, no one feels that regulation provides the most efficient framework; but once even a minor issue arises, all criticism and accountability point to the regulatory body.

This imbalance in expectations actually increases the workload pressure on regulatory bodies, causing them to adopt a more conservative attitude when facing all business applications. For us, this means longer approval times and higher communication costs, but we also understand that this is because they want to protect investors and the long-term healthy development of the market in the most rigorous way.

I believe we should have more understanding and support for regulatory bodies. Their task is not just "control," but also to establish new rules of the game that allow more wealth to safely enter the Web3 space. Although the process may be cumbersome, it lays the foundation for the future of the entire industry. What we need is to work with them to find a balance between compliance and innovation through continuous communication and cooperation.

Alma: How is EX.IO currently operating? What is the team size, structure, and cash flow situation? What are your future plans?

Wu Chen: EX.IO is now operational, with trading supported on the web and mobile via H5. After 71 days of operation, the on-site trading volume exceeded $100 million, reaching $200 million just 15 days later. The team is close to 100 people, distributed across Hong Kong, mainland China, Taiwan, and other locations. The IT department accounts for the largest proportion, and all systems are self-developed; we did not purchase any off-the-shelf exchange systems. Financially, the SFC requires licensed exchanges to maintain at least 12 months of operational cash flow, and if it falls below that, we must report immediately, so our cash situation is ensured to be healthy. Our current clients are mainly professional investors (PI), accounting for over 75%, with trading volume concentrated in fiat deposit and withdrawal scenarios for Bitcoin and USDT.

In the coming weeks, we plan to launch over-the-counter trading and primary distribution services, at which point we will initiate promotional activities to seize market opportunities. For more complex products, such as RWA, our strategic focus is on professional investor clients. Under the current configuration of compliant exchanges in Hong Kong, retail users are more inclined to allocate to "blue-chip" assets like BTC ETFs.

Alma: Compared to OSL and HashKey, what are EX.IO's strategies and advantages?

Wu Chen: Compared to OSL and HashKey, our differentiated advantage lies in our positioning. Our slogan is: By TradFi, For TradFi (from traditional, not just traditional). This is determined by our team's background, the background of our shareholders, and our network advantages. We understand best what wealth from traditional finance needs, so for example, with RWA (real-world assets), in addition to providing listing, distribution, and trading services, we are also willing to help every issuer design RWA product structures and token economics for free, similar to traditional financial investment banks, which is still a blank space in Web3. For instance, in the two RWA selection meetings we held on July 22 and August 12, we showcased several representative projects each time, covering categories such as fixed income, revenue sharing, and utility tokens like AI computing power tokens. The uniqueness and coverage are very broad, attracting over 150 institutions to participate each time. After each project presentation, every audience member votes on their level of interest in the project, and the MVP project of the day is announced at the end. What projects are popular and which are not recognized will have very intuitive feedback immediately. RWA can improve the efficiency of traditional financial assets, such as daily dividends instead of the traditional quarterly or annual dividends; it can also complete the work of syndicate agents through smart contracts, reducing several months of processes to just a few minutes. These are all things that traditional financial institutions need and are disruptive to productivity. We believe RWA is the breakthrough point for compliant exchanges in Hong Kong, attracting traditional financial institutions into Web3.

Alma: There seems to be a conflict between compliant exchanges and the decentralized spirit of Web3. How do you view this contradiction?

Wu Chen: This is a process. Currently, many traditional users cannot use wallets and face high risks from non-compliant platforms. Compliant exchanges provide protection and trust. In the future, as users' understanding of Web3 improves and wallet usage becomes widespread, the advantages of compliance may weaken. But at this stage, compliant exchanges are the bridge for traditional capital to enter Web3, addressing user entry barriers and security issues. Can you imagine the early 2000s when the internet and broadband were just starting to become popular? We are just beginning.

Alma: What is EX.IO's future layout? Will you consider going public or acquiring non-compliant exchanges? When will Hong Kong compliant exchanges achieve profitability?

Wu Chen: We have obtained preliminary license approval in Dubai. We are also applying for a sandbox project under the CMA in Saudi Arabia. We are currently preparing for a new round of financing. We are open to the possibility of going public or acquiring non-compliant exchanges. The profitability challenge for compliant exchanges in Hong Kong is significant and relies on new businesses like RWA. In the long run, RWA can attract traditional capital and enhance market vitality, which is key to achieving profitability.

Alma: What is the development prospect of stablecoins in Hong Kong? Does the offshore RMB stablecoin have potential?

Wu Chen: The biggest challenge for USD stablecoins is: how to surpass USDT and USDC? Hong Kong's USD stablecoins are regulated by local banks and do not involve the long-arm jurisdiction of the U.S. The offshore RMB stablecoin has potential and strategic significance, as it can assist in the internationalization of the RMB. I am also very curious to see how the first stablecoin pegged to CNH develops. The core of stablecoins lies in the underlying assets and use cases. In fact, besides stablecoins, there is another possibility: future transactions may not be limited to currency but could be based on a barter system. Currency will gain consensus and credit in new forms.

Alma: Where does your confidence in the RWA market come from? Can it solve the dilemmas of compliant exchanges in Hong Kong?

Wu Chen: RWA is a shortcut for traditional finance to enter Web3; it is the medium through which traditional finance can quickly understand "coins," and it can significantly improve efficiency, such as daily dividends, peer-to-peer trading, and reducing intermediaries (like Loan Agents). Most RWA projects we encounter are securities-type assets, similar to inter-institutional business in traditional finance, but blockchain technology makes it more efficient.

Alma: What advice do you have for traditional financial users entering Web3?

Wu Chen: For practitioners, I suggest staying calm and not rushing to go all in on Web3. It’s better to first accumulate advantages in traditional finance and then explore Web3 projects like RWA to find a feel, which is equivalent to finding a point of entry. For investors, I recommend making allocations first and choosing compliant platforms. Traditional users face issues like high fees and banks not recognizing virtual assets when purchasing Bitcoin and other assets, while compliant exchanges like EX.IO can provide safe and convenient deposit channels.

Alma: Recently, there have been rumors in the market that KOLs in Hong Kong may need to hold licenses to operate, and we have reported on this topic, finding it quite shocking. What do you think about the requirement for KOLs to be licensed? What impact will it have on the industry in the future?

Wu Chen: This news indeed conflicts significantly with the understanding of the Web3 community, and regulatory agencies may use this as an opportunity to further regulate promotional activities related to virtual assets. The specific details are not yet clear. If this policy is implemented, its goal may be to refer to the regulatory standards for similar stock analysts in the traditional financial industry, requiring Web3 KOLs to adhere to higher professional and disclosure requirements when making investment recommendations, in order to prevent disorderly promotion and misleading information in the virtual asset market, maintain market order, and protect investors' interests. I am not sure what the regulatory policies for KOLs will look like, but referring to the process for traditional financial practitioners to hold licenses, applying for a license requires passing an examination by the assessment bureau, with costs around several thousand Hong Kong dollars. After the exam, one needs to be registered with a licensed institution and undergo compliance and risk control training from that institution before being able to sell externally. Of course, KOLs have different responsibilities and functions; they exist in a more independent and neutral capacity, so this approach may not be suitable.

Summary

This interview deeply reveals the current status and future of compliant digital asset exchanges in Hong Kong. Wu Chen, with her cross-disciplinary experience in traditional finance and Web3, leads EX.IO to find breakthroughs in a strict regulatory environment, particularly through innovative practices in the RWA market, providing an efficient path for traditional capital to enter Web3. She has a profound insight into the delicate balance between the industry and regulation, calling for more understanding and support for regulatory agencies from society, emphasizing that they are an important cornerstone for protecting wealth entering Web3. With the vision of "By TradFi, For TradFi," EX.IO's success not only showcases the team's professional capabilities but also injects new vitality into Hong Kong's digital asset market. In the future, with the further development of the RWA and stablecoin markets, Hong Kong is expected to secure a place in the global Web3 competition, opening a new chapter for the integration of traditional finance and the digital economy.

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