The fast-changing fintech industry

Blockchain-based technologies continue their disruptive journey in the financial services industry. Some jurisdictions more than others are taking the stage as fintech powerhouses with transformative initiatives and a particular focus on digital assets. Technology, favourable regulation, and ecosystems attract investors and drive the market to innovative solutions. Regulators are addressing the risks while looking at the potential benefits of digital assets and their underlying technologies. The aim is the protection of consumers, investors, and businesses, as well as maintaining the safety and soundness of the financial markets.

The regulatory framework is evolving rapidly, some jurisdictions have imposed outright bans while others are staunch advocates. Complete restrictions are rare and

Developments in Hong Kong

Hong Kong can be considered the jurisdiction that recently evolved the most. In fact, the Hong Kong FinTech Week in November 2022 gathered thousands of industry leaders, policymakers, and fintech innovators to discuss some of the biggest opportunities in the fintech industry as well as the challenges faced by the sector.

The main conference saw government officials, regulators, and industry leaders announce new initiatives and share updates on their ongoing fintech projects.

The Financial Services and the Treasury Bureau (FSTB) took the opportunity to issue a policy statement, sharing the government’s stance and approach toward developing a vibrant sector and ecosystem for virtual assets.

difficult to enforce, but regulators are struggling to set clear rules for a fast-changing industry.

Monetary and financial authorities around the world are willing to develop consistent compliance and tax frameworks, prevent scams and money laundering schemes, monitor risks, and ultimately regulate the industry. Adding to the challenge is the ambiguous nature of digital assets themselves and the lack of standardized definitions.

In this perspective of regulatory evolution, Fidinam has drafted a White Paper to summarize general guidelines on the most relevant jurisdictions involved in the development of the fintech industry with a particular reference to compliance, taxation, reporting, and corporate requirement.

Furthermore, Hong Kong’s legislative council has passed a new amendment to its Anti-Money Laundering (AML) and terrorist financing system to include virtual asset service providers, review property rights for tokenized assets and the legality of smart contracts, as well as undertake pilots on virtual assets including non-fungible token (NFT) issuance, green bond tokenization, and e-HKD, a digital currency project launched in 2021.

The latest legislation will establish a new licensing regime for virtual asset service providers (VASP) set to come into effect from June 1, 2023. The new amendment will subject crypto exchange service providers to the same legislation as followed by traditional financial institutions.

What qualifies as a virtual asset exchange and how do I open one?

Under the new Hong Kong virtual asset licensing regime, any person operating a virtual asset exchange (VA Exchange) or actively marketing such service to the Hong Kong public will be regulated and required to apply for a VASP license from the Securities and Futures Commission (SFC).

VA Exchange means providing services through means of electronic facilities

a.

whereby offers to sell or purchase virtual assets are regularly made or accepted in a way that forms or results in a binding transaction, or persons are regularly introduced, or identified to other persons in order that they may negotiate or conclude, or with the reasonable expectation that they will negotiate or conclude sales or purchases of virtual assets in a way that forms or results in a binding transaction; and b. where client money or client virtual assets come into direct or indirect possession of the person providing such service.

Virtual exchanges looking to open a business in Hong Kong will have to go through rigorous AML guidelines and investor protection laws before being granted a license of operation.

For a successful application and business operation, it is advisable to work with experienced service providers, like Fidinam. License applications involve several forms and supporting documents. One should be mindful not to submit paperwork that will lead to adverse effects.

Furthermore, it is vital to have a sound AML/CTF compliance framework and stay on top of ongoing compliance requirements, to avoid the risk of fines or even losing the license.

Sara Silenzi Head of Desk Fidinam (Hong Kong) Limited

How was Code-Create born and launched?

Code-Create, an international fashion AI company based in Hong Kong, is co-founded by world renowned AI innovator Prof. Calvin Wong and fashion C-suite leader Ms. Kim Wong in May 2022.

Calvin is recognized as one of the Ten New Innovators by the Fashion for Good Global Initiative 2021. His inventions have received numerous accolades including two Grand Awards and a Gold Medal with the Congratulations at the 47th International Exhibition of Inventions in Geneva.

Kim is an accomplished business leader with extensive experience in the fashion and luxury industry, building business across China and APAC and leading operations for iconic global brands including DFS USA, Lane Crawford, Burberry Asia, Brunello Cucinelli, and Versace Asia Pacific.

Code-Create is the first spinoff company from the Laboratory for Artificial Intelligence in Design (AiDLab) to commercialize the state-of-the-art fashion AI solutions. AiDLab is the first research platform that focuses on Artificial Intelligence (AI) and design innovation, is a research operation jointly established by The Hong Kong Polytechnic University (PolyU) and The Royal College of Art (RCA) in the U.K.

How did the idea of combining AI and the Fashion industry come about?

We see a need in the industry because the existing AI solutions only give random output on single item without the designer’s identity and input. We believe that fashion collection needs to have the human input with the brand or designer’s DNA: the theme and creativity should be consistent throughout the new collection and after 2 years of hard work, therefore AiDA is already developed.

During the 2 years of the development, we worked closely with international designers from Hong Kong, Shanghai, Korea, Italy, and Australia for their industry inputs. Their collections using AiDA were featured in a spectacular FASHION x AI show at M+ Museum on Dec. 19th, 2022.

How does AiDA work and what are its aims?

AiDA, equipped with a variety of AI technologies, is the first in market INTERACTIVE AI design assistant for fashion. AiDA empowers designers to work with AI for speedy ideation while, at the same time, ensures designers’ DNA. AiDA facilitates designers’ inspiration and creative process through designers’ input including mood board, fabric prints, colour choices and sketches. With just a few click AiDA will generate eight options within 10 seconds for designer. Designers could select or refine their options to complete their collections, and the proposed options will also inspire designers for new shape and ideas. The conventional and intensive process is enhanced by AiDA with efficiency, flexibility and agility; and the possibilities are without limit. AiDA aims to develop an interactive relationship with designers, bouncing ideas together. The more users use AiDA, the more AiDA gets to know user’s style and preferences, and so it interacts with them accordingly. Currently we see great interest from both academic and commercial sectors, and I am happy to share that AiDA is accepted by the School of Fashion and Textile as the new curriculum for the bachelor’s degree program.

Who is currently showing more interest in your AI products (AiDA)?

AiDA is amazing due to the advance AI technology: it is so user friendly that users could learn to use it in a few minutes, and functions are practical for the actual design, adding value to the industry. Initially I expected China, US and UK would be the countries quickly responding to fashion AI, then, when we officially launched AiDA along with our website www.code-create. com.hk and Code-Create Facebook on Dec.19th 2022, we had interestingly received positive responses from all around the world, including South Africa, India, Korea, just to name few of them. This is exciting for Code-Create because AiDA is available globally through the web and the initial response proves that the business potential is phenomenal and we need to quickly penetrate the market.

From your experience, which countries are most likely to use AI products?

How did the partnership between Polytechnic University of Hong Kong and the Royal College of Art in the UK start? Was it difficult to combine London and Hong Kong?

The School of Fashion and Textiles at Poly U and RCA are two world leading universities in fashion research, and we have collaborated with them on many research projects in more ; therefore, the joint establishment of AiDLab, funded under the InnoHK Research Clusters by the HKSAR Government, is a positive extension of our collaboration. revitalize the fashion ecosystem therefore AiDA is the first step to take to apply AI in the design inspiration process. We are working on a new development to apply AI in fabric print not only to enhance the creativities for fabric companies, but also to connect AiDA users with fabric suppliers for the prints they globally need. We would also like to collaborate with other AI partners in the future, in order to improve the fashion ecosystem, and eventually Code-Create would like to develop a global AI showroom connecting and cultivating design talents all around the world. Code-Create is also passionate about education and building communities, therefore we will work towards the goals to establish scholarships, workshops, mentorship, regular chat and sharing in order to support the fashion communities and the next generation.

Do you think that AiDA, and AI in general, is making a positive impact in terms of sustainability?

AiDA assists designers in the creation of collections with less wastage throughout the inspiration and production process. Therefore, I believe AiDA will positively impact the fashion industry with more creativity, more sustainability, more possibility and more efficiency.

What are your plans and goals for the company?

Do you believe that AI and technology will be the future in the fashion industry?

I believe that AI and technology will become an useful tool in the fashion industry, but, however, I do want to stress that humans should take the leadership because it is the human thinking, passion, emotion and even imperfection that breathes life into the design, which connects with the consumers. Therefore, we should embrace AI and technology, use it wisely so we could have more time to spend on connecting and understanding our customers and market, and improving our society and communities. We can not get lazy with the convenience of AI.

Which suggestion would you give to the young entrepreneurs who would like to get closer to the AI Fashion world?

I believe that the young entrepreneurs are very familiar with the digital world and easily master AI technology. However, the fashion world is pretty complex with so many elements and change factors within the entire cycle, therefore there will not be one technology that applies to the entire cycle, you might need to integrate various technologies to meet your business needs. A good understanding of the fashion cycle and operation process will be very helpful. I would also encourage young entrepreneurs to build an appreciation for the fashion history and the incredible workmanship and story that make the fashion piece so special, because this recognition will flavour your future growth and development.