How Hong Kong can benefit from a rising Asia and growing metaverse

Rising Asia is a massive source of future world GDP growth. The commercial potential of the metaverse is put at US$1 trillion annually. It follows that the metaverse will need content that caters to Asia’s needs and tastes. In Hong Kong, the metaverse represents a lucrative opportunity for building a tech-enabled creator economy. Content creation for the metaverse and technologies like blockchain and NFTs could be a source of new jobs in the area. This could help invigorate the city’s hi-tech workforce and contribute to the innovation-driven economy of the Greater Bay Area, China’s plan for a regional innovation hub on the order of Silicon Valley. The metaverse is an increasingly immersive evolution of the internet, made up of always-on digital worlds. Avatars – digital versions of ourselves which are our “presence” in these worlds – are infinitely customisable. The metaverse is also a space where people can interact and trade their assets using blockchains. Accessing the metaverse through headsets like Oculus can feel pretty clunky. But, in the future, technology could well enable a sense of physical embodiment that rivals our experience of the real world. One aspect of the metaverse that has gained a lot of attention in the past year is the non-fungible token (NFT). NFTs are digital assets whose ownership and uniqueness are verified by blockchains. They can be owned and traded much like physical assets. But, unlike an artist who sells a painting in the physical world, NFT creators receive a percentage of the sale price every time their creation is traded. In 2021, despite the pandemic – or maybe because of it – the NFT market hit US$40 billion, according to blockchain data platform Chainalysis. Critics worry that NFTs and the metaverse universe are a bubble. But not surprisingly, given Hong Kong’s status as Asia’s art and financial hub, the city has joined the craze with gusto. NFTs have fetched millions at local art auctions, while both crypto and NFTs are causing venture capital funding to pour into Hong Kong. Prominent recipients include FTX, a cryptocurrency exchange, and Animoca Brands, a blockchain gaming company known for championing an open metaverse and NFTs in video games. Animoca saw its valuation rise to US$5 billion in early 2022, based on a US$358.89 million funding round from prominent venture investors. Bubble or not, large incumbent players emphasise the crucial role user-generated content plays in their long-term plans for the metaverse. Meta, for example, is developing design tools that will enable it to expand is current creator pool of 600,000 people, helping designers with no prior experience design in immersive formats. There are nearly 6 million Meta users in Hong Kong and some 1.28 billion monthly active users in Asia, so there is a ready audience for new content. The gaming platform Roblox, meanwhile, with a base of 55 million daily active users, relies entirely on independent designers and creators to develop content. There is a growing demand for its content in Asia, the platform’s fastest-growing market. In 2021, Roblox paid out over US$500 million to its game designers around the world, a figure that grew 52 per cent from 2020. Metaverse creators will develop their skills alongside the evolution of creator tools like Unity, the design tool behind some of Asia’s most popular games, including Call of Duty. AI and machine learning will also assist user-generated content creation. For example, Roblox is experimenting with using AI and machine learning to automatically translate games developed in English into eight other languages, including Mandarin, French and German. Beyond the consumer side, tools like Nvidia’s Omniverse offer Hong Kong-based designers access to commercial applications like digital twinning, a process of advanced simulation that allows companies to run tests on physical assets like factories using digital versions. Nvidia’s Drive Sim, a virtual world for hosting the digital twin of autonomous vehicles, and its Isaac Sim, which enables digital twinning of industrial robots, are two examples that could help build Hong Kong’s offerings in the Greater Bay Area. The development of Hong Kong into a hub for creative metaverse talent will present some near-term challenges. If the city is to succeed, it must navigate the tech regulatory landscape both at home and on the mainland. One obvious issue is that although the metaverse is meant to be open and accessible, Beijing maintains a strict censorship policy on the internet. This does not extend to Hong Kong yet. To underline how this difference in policy affects users, the top three sites in Hong Kong – Google, You Tube and Facebook – are not available on the mainland. Content, therefore, would have to be tailored accordingly. In Asia’s virtual future, will one metaverse emerge to rule them all? Regulatory regimes also differ between mainland China and Hong Kong in other key areas. China has banned cryptocurrency entirely, even as it highlights blockchain as an important technology in its 14th Five-Year Plan. The Hong Kong Monetary Authority plans to have the city’s new regulatory regime for crypto assets ready by July. Beijing allows NFTs, but in a much more limited way than Hong Kong. On the mainland, they are completely decoupled from cryptocurrency, with little secondary market trading. Although Hong Kong has not banned cryptocurrency or tightened restrictions on NFT trading yet, the government-run cybersecurity watchdog, the Hong Kong Computer Emergency Response Team Coordination Centre, has warned that risks involving NFTs and the metaverse are among key security threats in 2022. Once regulatory boundaries are clarified, the outlook for user-generated content will become clearer, too. Regardless, the Hong Kong spirit of innovation and creativity will doubtless find ways to make the most of the metaverse. Jill Baker is adjunct fellow at Asia Business Council