On April 6, the "2025 Hong Kong Web3 Carnival" officially opened in Hong Kong. Xiao Feng, Chairman of Wanxiang Blockchain and Chairman and CEO of HashKey Group, delivered a keynote speech titled "Public Chain: A New Generation of Financial Infrastructure." Xiao Feng stated, "As a new financial infrastructure, public chains can change the currency creation process through programmable transaction settlement via smart contracts, achieving a mechanism of disintermediation and transparency. In the future, new programmable currency payment and settlement systems can be constructed through mediums such as stablecoins and CBDCs. The new capital markets and financing models created by new asset issuance can achieve value co-creation."

The following is the full text of the speech:

Thank you very much for coming to the event so early. I know that the preparations for the event went on until two or three o'clock last night, and it is indeed very hard for everyone to get up so early today.

This morning's theme is about blockchain, and everyone has discussed Crypto and Tokens extensively. Under this theme, I would like to reorganize our understanding of blockchain distributed ledgers from a financial perspective. How should we establish an analytical framework from a financial viewpoint?

Therefore, my topic is "Public Chain: A New Generation of Financial Infrastructure."

(1) What is Financial Infrastructure

When it comes to financial infrastructure, we first need to clarify what financial infrastructure actually is. Financial infrastructure can be divided into two parts: the first part is the financial system infrastructure; the second part is the financial market infrastructure.

The financial system infrastructure is more about "software" and institutional arrangements. Its main content consists of laws, accounting standards, regulatory frameworks, and the entire social payment and settlement system. It is primarily an institutional arrangement for a country or an entire market, and technology or hardware is not the main concern. The financial system infrastructure is designed more from the perspective of public interest and financial macro safety.

(2) What is Financial Market Infrastructure

There is a branch of financial system infrastructure called financial market infrastructure. Financial market infrastructure is more micro, technical, and operational for the entire financial market. Its main components include trading, clearing, and settlement, establishing such a foundational framework. Therefore, its main content includes registration and custody, clearing and settlement, trading facilities, trading reporting databases, and credit systems. When we discuss the main framework of financial infrastructure, we will find that the distributed ledger based on blockchain may not just improve marginal benefits but can bring disruptive developments in trading, clearing, and settlement.

The payment, clearing, and settlement we often talk about are actually three different stages of the financial market. Payment means we swipe a card at a store; this action is called payment. After you swipe the card, it goes through a clearing system that first notifies my bank, checks whether I have the money in my account, and if so, holds the funds; this is called settlement. The third step is clearing, which may involve transferring my money to the merchant's bank account if the store's bank is a different one. Once the funds are transferred, the settlement process is complete.

The financial market infrastructure mainly focuses on this aspect of work.

(3) New Financial Infrastructure

Now, a new possibility has emerged, which is the new financial infrastructure brought about by blockchain. What are the essential differences between the new financial infrastructure and traditional financial infrastructure?

First, the accounting method has changed; distributed accounting and double-entry accounting are two different methods.

Second, the accounting accounts are different; traditional finance relies on bank accounts to record all our economic activities, but in the new financial infrastructure, there are no bank accounts, and it is more about digital wallets, collectively referred to as crypto accounts.

Third, the accounting units are different; the accounting unit in traditional financial infrastructure is fiat currency, whether it is RMB, Euro, or USD, all of which are sovereign currencies and legal tender. In the new financial infrastructure, the accounting unit is cryptocurrency, or at least you must tokenize fiat currency, such as USDT or USDC; otherwise, you cannot use it as an accounting unit in the new financial infrastructure.

(4) New Financial Market Infrastructure

As a new financial market infrastructure, the ledger relies on blockchain, which is a publicly transparent global public ledger. Assets registered on the blockchain mean you have achieved global reach and established global liquidity.

Now we face a contradiction; for example, RWA (Real World Assets) is the issuance of securities. Any issuance of securities is subject to the jurisdiction of a specific region. For instance, something approved by the SEC in the United States may not be accepted as a public market investment tool in Hong Kong. A certain RWA security token approved in Hong Kong may not be accepted by local regulatory authorities in Tokyo.

However, when RWA is registered on the global public ledger, registration, custody, trading, and exchange are no longer limited by administrative divisions. When it circulates into the secondary market, it has already transcended a specific administrative region. So far, no good methods have been found to resolve cross-regional contradictions, but the global liquidity of any RWA is not an issue.

Secondly, many intermediaries have disappeared in the new financial market infrastructure. Thirdly, the model of clearing and settlement has changed; all clearing and settlement are net settlements. Two banks may conduct countless transactions in a day, and ultimately, based on net amounts, ICBC needs to pay CCB 10 billion, and CCB needs to pay ICBC 12 billion, resulting in only a 2 billion transfer from one bank to another. This is called net settlement. But in blockchain, in the new financial market infrastructure, it is settled on a per transaction basis, with each transaction completing payment, settlement, and clearing all at once.

(5) New Generation of Currency Creation System

Because you can make currency programmable on the blockchain through smart contracts, yesterday's news was that the U.S. SEC stated that stablecoins issued with USD as reserve assets do not fall under securities. There was a lot of discussion in the industry about this; it not being classified as securities allows for many possibilities. However, I believe the biggest benefit is that when stablecoin issuance is not classified as securities, it means that the entities participating in stablecoin issuance are no longer limited to licensed institutions or licensed financial institutions, because it is not a security but a virtual commodity. Therefore, the range of institutions that can issue virtual commodities is greatly expanded.

With this expansion, you are actually allowing unlicensed and unregulated institutions to participate in the currency creation process, as stablecoins can essentially be seen as part of the M2 segment of currency creation. Currency creation has been democratized; previously, only banks and financial institutions could participate in the currency creation process. Money market funds are indeed part of M2, and now stablecoins are also part of M2, but saying they are not securities allows many institutions to participate in the currency creation process, which is a new change brought about by blockchain technology.

(6) New Generation of Payment and Settlement Systems

Next, let me quickly summarize the characteristics of the new financial infrastructure and new financial market infrastructure.

Based on this new financial market infrastructure, a new generation of payment and settlement systems has been constructed. The payment tool is stablecoins or future central bank CBDCs, and it is a peer-to-peer, instant, zero-fee payment and settlement system. Former President Trump specifically requested that Congress pass the stablecoin bill before the August recess this year. This is actually much more important than the discussions about the U.S. establishing a Bitcoin national reserve; it is much more critical for the U.S. government because it ensures that in Web3, in the digital economy, in the Web3 world, and in the Crypto world, the U.S. dollar remains a major settlement tool. This is a core national interest for the U.S. to ensure the global hegemony of the dollar.

So we see a process: after World War II, there was first the dollar backed by gold. When the dollar began to decouple from gold, it later became the petrodollar as a settlement currency for commodities. Now we are truly moving towards the third step, in the virtual world, in the metaverse, where they continue to strive to ensure that the dollar maintains its status as the mainstream settlement currency, transitioning from gold-backed dollars, to petrodollars, to tokenized dollars.

(7) New Generation of Asset Issuance Systems

Based on this new financial market infrastructure, a new generation of asset issuance systems is actually being constructed. All tokens can be divided into five categories: payment tokens, such as stablecoins; reserve tokens, like Bitcoin; functional tokens, like ETH; security tokens, such as RWA and tokenized money market funds. There is another category that I am not sure fits this classification well; later I saw A16Z classify all tokens, and we coincidentally listed MiniCoin as a separate category, which has its reasoning and is not entirely unreasonable. These five categories of tokens must be issued based on blockchain and the new financial market infrastructure. If we look back since the Industrial Revolution, a Nobel Prize-winning economist once said, "The Industrial Revolution had to wait for a financial revolution because without the cooperation of a financial revolution, the Industrial Revolution might not have occurred." This is the result of a lifetime of research by a Nobel Prize-winning economist.

We indeed see that every industrial revolution is accompanied by a revolution in financing methods. The British Industrial Revolution relied mainly on bank credit support. However, the second industrial revolution occurred in the U.S. due to the stock market, transitioning from credit capital to stock capital. The third industrial revolution in the U.S. is called the information revolution, which is closely related to Silicon Valley's venture capital. You could say that without venture capital, there would be no Silicon Valley, and thus no current technological revolution in the U.S.
Now we are entering the fourth industrial revolution, which is called digital/intelligent. Does the fourth industrial revolution not require a new financial revolution to accompany it? To promote the development of the new industrial revolution? What we are seeing now is actually Crypto and crypto finance, which will become the core financial innovation supporting the fourth industrial revolution; this is a change in the capital market.

(8) New Generation of Financial Market Systems

In fact, based on the new financial market infrastructure of blockchain, a new financial market system is being constructed. We refer to traditional finance as CeFi (Centralized Finance) and blockchain-based finance as DeFi (Decentralized Finance).
What does CeFi rely on? It relies on continuously increasing leverage to maximize investment returns; but DeFi does not do this. DeFi involves over-collateralized borrowing. If you borrow in DeFi, you must over-collateralize, and after over-collateralization, DeFi can still provide returns of 8%, 10%, or even 15%. How is this achieved? The returns in DeFi come from improving the efficiency of capital turnover.

We know that the fastest loan in DeFi, from occurrence to completion, takes how long? It only takes one second or three seconds; the so-called "flash loan" on the blockchain is an extreme case. Not all loans are flash loans, but only on the blockchain can a loan be completed in a few seconds. If a loan can be completed within ten seconds, recovering principal and interest, how many times does your capital turn over in a year? It is achieved by increasing the frequency of capital turnover to obtain low-risk returns without changing the risk profile or while reducing the risk profile.

(9) New Generation of Asset Trading Systems

In fact, based on blockchain technology, we are constructing a new generation of asset trading systems. In the United States, there are two stock exchanges: the New York Stock Exchange and NASDAQ, both of which have announced plans to establish a 5×23 hour trading system. However, they are currently unable to achieve 7×24 hour trading. I believe this is the trend for future reforms in the stock market, and I also believe that the Hong Kong Stock Exchange and mainland exchanges may eventually have to adopt a similar 5×23 hour trading system.

However, the Crypto market and Tokens have been trading 7×24 hours since their inception, making it a new trading system. Moreover, there are two types of new trading systems: one is called centralized exchanges, and the other is called decentralized exchanges. Centralized exchanges take digital native assets off-chain and conduct trading in centralized exchanges off-chain. At the same time, Trump's Meme coin has fully demonstrated that the entire process from asset issuance to trading can be completed entirely on-chain, known as Onchain, proving that this business model is feasible.

(10) New Generation of Wealth Distribution Systems

The new payment and settlement system built on blockchain is also a new wealth distribution system. It is possible that AI will operate independently of human command and autonomously create commercial value. So how should the value created be distributed? AI itself does not need to drink or eat Cantonese cuisine, so the wealth it creates must be distributed to others for use. This distribution method is what economists studied twenty years ago, known as UBI (Universal Basic Income), which distributes the immense wealth created by AGI (Artificial General Intelligence) through UBI.

Thus, we see two representative figures in the United States: one is Sam Altman, and the other is Elon Musk. Both of them are holding AI in one hand and Crypto in the other. Sam Altman even has his own blockchain network, his own world ID, and has issued his own Worldcoin. This system will eventually be used to distribute the immense wealth created by AGI.

(11) New Generation of Business Governance Systems

Based on blockchain technology, we can establish a new business governance system. We know that blockchain is first and foremost open-source and permissionless. Anyone can use Ethereum, or if you want to deploy an application on Ethereum, you do not need to obtain anyone's consent or approval. From a business application perspective, the blockchain system is a "plug-and-play" system. Additionally, due to the characteristics of blockchain itself, it allows for large-scale and effective collaboration among global strangers, which is also an innovation in business organization.

Based on a publicly transparent ledger, the information disclosure differs significantly from that of publicly listed companies. Theoretically and technically, blockchain-based business applications disclose information according to blocks. The data of any block is packaged, meaning that the information has already been put on-chain and is immutable, traceable, and accessible to anyone globally on the blockchain.

My sharing ends here. Thank you, everyone!

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