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Hong Kong-based start-up PANGU, a metaverse agency appointed by The Sandbox, is helping clients to enter into the metaverse by providing asset creation and branding consultation services. The company said it is building various business models, including the play-to-earn (P2E) model for clients to support its growth.

Kenny Ng, the founder of PANGU by Kenal (left) believes the Metaverse would be the tendency of the future; 
and Zero Chung (right) thinks that providing customised solutions to clients is key advantage of the company.

Interior designer in the Metaverse

Stepping into the office located at Kowloon Bay, Eastern Kowloon in Hong Kong, a mini botanical garden has been set up at the base’s main entrance. Agave americana, more commonly known as Century Plant, and other various potted plants are growing under the owner’s care. The vibe of the working environment and its inspirations also come from the green belief.

PANGU, the visual design production company established as its affiliate of the Kenal Group, has hired over 20 staff and still rapidly expanding. Kenny Ng, Founder of PANGU by Kenal, established his team around eight months ago. Ng shared his experience with Blockchain.News, “just like other start-up companies, we are gradually expanding our scale, starting from building up our products with designers, then developing business and marketing teams at the following stage.”

Furthermore, the company plans to establish community management in the long term, PANGU’s Ng shared his ongoing business plans to Blockchain.News.

This company has connected with The Sandbox since last November in 2021 and was just appointed as the official TSB Metaverse agency in April, which is rare for HK-based startups in the global market. According to PANGU, the agency raised its capital independently, followed by grants from The Sandbox’s “game maker fund”, which aims at connecting with the next generation and the tendency of web 3.

These services support its business growth by providing a one-stop solution, including land purchase with development, offering marketing strategy, digital assets creation and branding collaboration for clients from online to offline.

Kenny Ng, Founder of PANGU said:

“As an agency (of The Sandbox), we wish we are able to provide complete solid service with own our resources, instead of outsourcing works to other parties, which is not practical. So, that would be our direction in practice.”

“Our partnership (between The Sandbox and clients) is more like property developers, and we play our role as the builder and property management unit as a contractor, offering consultations for clients on how to develop their own lands and promote their branding through online and offline activities,” Chung added.

Projects such as Metagreen or clients of Mcdull or other premium banks in Hong Kong are part of their key clients, these corporate firms have entered into the Metaverse through The Sandbox. In the project of Metagreen, PANGU said they are mainly responsible for virtual land development, non-fungible token (NFT) creation, but also partnerships from online to offline, including partnerships with NFT gallery, NGOs and running other community channel management, such as Discord.

The founder told Blockchain.News that “in this early stage of the Metaverse, most clients are still discovering and exploring what they can do after investing in these virtual lands. Some clients prefer to shape a revolutionized image and identity in the virtual space, while some clients prefer to promote their branding traditionally,” adding that “we are working together with clients to find out a potential and possible (virtual) identity by helping them to build its ecosystem in this space.”

The Chief strategist suggests customized design and creative solutions for various clients would be one of the advantages for the company to remain competitive in the industry, as the company is not just serving local customers but serving globally.

P2E Development

Meanwhile, inspired by environmentally sustainable beliefs, the company also transformed itself into a game developer, trying to bring different scenarios to this virtual space.

Earlier this month, the game developer virtually launched an NFT drop project, connecting with a gamification-based metaverse space. Featuring ecology conservation and environmental sustainability, the company is introducing a gamification-based platform for players to explore another virtual world– Ecoland.

The Ecoland is a diversified ecosystem, featuring environmental and educational theme interaction for players, according to PANGU. The company said its assets creation is fully designed from scratch by itself. Their voxel characters are unique with high quality.

Operating through the Play-to-Earn (P2E) model, the platform has associated with The Sandbox, players can earn SAND tokens or win some exclusive NFTs after completing several missions in the game in exchange for upgrading their equipment and tradings.

In addition, the gaming platform also wishes to escalate its landscape in the Metaverse, bringing more interactive ways in different scenarios, such as “Play to learn”, to deliver educational messages to players by completing some mini-games in the space. “We are also cooperating with several environmental NGOs, so we will donate serval amount to NGOs we cooperate with when customers buy specific NFTs from them. These objectives would help us fulfil social responsibility obligations,” Chung added.

Regarding crypto adoptions, PANGU said currently it would only use tokens for necessary transactions or trading among campaigns during the execution stage, such as paying gas fees during the minting of NFTs. “The company might use tokens in the future as the incentive for staff, encouraging them to stay tuned in the crypto space,” Ng added.

Previously, the company participated in the event the Artaverse, to increase its exposure to the industry.

PANGU discloses the company is expanding regional and overseas markets during Q3 and Q4 this year. 

Promising Potential Value in the Metaverse

According to the latest research from McKinsey & Company, the study suggests the preliminary value of the Metaverse it creates in the space could grow up to $5 trillion by 2030.

E-commerce would be the largest driving force, which takes up to $2.6 trillion, followed by virtual learning ($270 billion), advertising ($206 billion) and gaming ($125 billion) sector.

Meanwhile, the blockchain-related application and scenarios on the Metaverse are still expanding.

Author of “Snow Crash”, Neal Stephenson, who created the term “the Metaverse” nearly 30 years ago, has recently announced a new project named LAMINA1, according to online media outlet Decrypt.

The project was described as a “free metaverse”, a blockchain-based network for building the open Metaverse. “We’re going to have all the facilities of a full layer one (blockchain) to help support and encourage the creators who want to build with us. That is my and Neal’s strategy—align everything around getting the best thing built and getting everybody all the tools they need to build what they want,” Vessenes explained.

Imagination of Virtual Land

The land issue in Hong Kong remains one of the most challenging issues in the city. With limited space and high demand, physical land has become one of the rarest resources for housing, real estate and other property developments.

Since the arrival of Metaverse and virtual lands in recent years, the bond and chemistry between these two topics have the caught attention of investors who wish to join the virtual space instead of trading physical land. More local entities or corporate firms in Hong Kong, as a result, foresee the potential benefit and investment opportunities in the Metaverse. However, these firms still need a builder’s help to construct the Metaverse infrastructure.

Apart from projects coordinated by PANGU, more local firms, such as Telcom operator PCCW and local railway operator MTR, also shared optimistic views by joining the Metaverse space, aiming at raising their awareness and exposure in the virtual space. Meanwhile, Meta, formerly named Facebook, and Yahoo have also entered into the virtual space. Yahoo announced the launch of a metaverse connection in the city in the hope that to reserve the old style and image of the city.

Blockchain.News recently had a conversation with Mr. Vincent Chok, the CEO of Hong Kong-based First Digital Trust, a technology-driven financial institution powering the digital asset industry, to help explore whether the cryptocurrency can be considered a viable addition to pension funds.

Bitcoin as Game Changer against inflation for retirement

The global economic crisis is taking a toll on some of the major pension funds around the globe. They are either struggling to make payments for the monthly stipends, as agreed or having little funds to sustain a robust pay scheme.

Speaking to Mr. Chok in an exclusive interview, Chok told Blockchain.News that the issue of inflation has eroded the harvest of retired workers:

“In many countries, inflation is higher than what a pension will yield, where you’re earning 1-2%. It is better to invest in alternative assets in a diverse way, where you can buy property, Bitcoin, and access more. Pensions are long-term, and inflation hits hard-earned money, eating away at the value of money.”

Many users are tired of the traditional pension plans in many countries due to bureaucracy and many processes associated with accessing such funds. This has led to more agitation for a better alternative. Many employees are now looking to use cryptos like Bitcoin to save up for their retirement.

Pension funds in most countries are significantly underfunded, which has led many to attempt to make up the shortfall between plan assets and obligations through investments. This illustrates the potential adoption of digital assets if more pension funds continue to add exposure.

While this is a move from the status quo, many global pension funds appear not to be in a hurry to explore this option. 

Growing Interest in Alternative Finance

Yet, several pension funds are looking for a change in the exploratory stage. Interest in investing in Bitcoin is growing in the industry. Firms are working to make it more accessible, as studies indicate that small allocations into crypto can yield favourable results.

In a comprehensive survey of almost 800 institutional investors across Europe and the US, 36% of respondents said that they are currently invested in digital assets, while 6 out of 10 believe digital assets have a place in their investment portfolio. Bitcoin continues to be the preferred digital asset with more than 25% of respondents holding the cryptocurrency.

A significant number of pension firms are increasingly investing in cryptocurrencies.

Bitcoin investment by Houston Pension Fund proved that cryptocurrency is not just appealing to individual investors. In October last year, the Houston Firefighters’ Relief and Retirement Fund (HFRRF) made a $25 million investment in Bitcoin and Ether, marking major news that a U.S. pension fund had put crypto directly on its balance sheet. Of course, $25 million was only a drop in the bucket compared to the $5.5 billion in total assets held by the fund – more precisely, representing just 0.5% of its portfolio.

The HFRRF was not the first U.S. pension fund to invest in crypto more broadly. In 2019, two Virginia Pension Funds – the Fairfax County Police Officers Retirement System (PORS) and Fairfax County Employees’ Retirement System (ERS) – invested $11 million and %10 million respectively in Bitcoin and further invested $50 million into the crypto in 2021.

The U.S. pension investment trend appears contagious as there is rising institutional demand from banks, hedge funds, private companies and even family offices in Europe and the rest of the world.

According to Chok, there is greater interest in and adoption of digital assets as a new investable asset class. The executive said there’s a lot of interest from companies to set up pension plans for employees, plus a lot of interest from banks to include digital assets and crypto into digital pensions.

Mr. Chok suggested that pension funds are often forgotten about but are an investment plan that everyone must have, usually by law. Governments force people to set up their pension accounts, put their money in, and then forget about it. Yields and returns of these investments aren’t lucrative.

“Bitcoin pension plans are for younger generations of people who can make tiny contributions that empower them to have far more diverse portfolios,” he said.

The Bitcoin retirement pensions not only help to provide education but also offer new opportunities than a mere 1-2% yield offered by government pension plans, Mr. Chok explained. 

“We see this having the biggest impact on younger generations, who will start to think about their future, their retirement, through the easy accessibility of wealth generation mechanisms,” Mr. Chok stated.

The Bitcoin pension plan gives more hope that younger generations can set themselves up for the future while enabling them to learn about diversifying portfolios and various wealth channels that are accessible and which young people can participate in, he elaborated.

“Pensions are a boring topic as people aren’t talking about this at dinner. But these new programs – The bitcoin pension plan – enable people to be more willing to learn and provide greater awareness of access to capital, and greater financial inclusion. We’re proud to be able to offer and educate people on new opportunities for wealth generation,” Mr. Chok told Blockchain.News.

Risks Involved

Yet, Mr. Chok acknowledged that such enormous achievements and benefits offered do come with shortcomings. For instance, since Bitcoin is speculative and highly volatile in its current state, some entities and individuals believe its long-term investment case is weak.

In March, the Department of Labor, raised serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptos. The department, which regulates 401(k) plans, cautioned retirement plan managers to be judicious when it comes to cryptocurrencies.

However, The Internal Revenue Code (Code) and the Employee Retirement Income Security Act of 1974 (ERISA) do not explicitly prohibit the use of crypto as a 401(k)-investment option.

Mr. Chok told Blockchain.News that in July last year, BnkToTheFuture.com, the largest online investment community of professional investors investing in blockchain, fintech and Bitcoin companies, launched a retirement for investors seeking to incorporate crypto as part of their retirement portfolio and inheritance planning.

Despites its volatility, Bitcoin is also attracting attention from institutional investors. More large US pension funds are beginning to consider the unregulated asset as a potential asset class. The announcement by Fidelity Investments, the nation’s largest provider of 401(k) retirement plans, about launching Bitcoin as an investment option, raised significant curiosity among market participants.

The global Fidelity Investment is another major large retirement services platform that has started offering a Bitcoin 401(k) product. By this, the company is providing employees with a saving for retirement opportunity to add up to 20% of their pension balance to Bitcoin.

Despite the risks, at least one major employer – MicroStrategy business and software services company – has signed up to offer Fidelity’s new product to its employees.

In June last year, a small 401(k) provider called ForUsAll started allowing consumers to allocate up to 5% of their retirement funds into cryptocurrency.

Of course, the potential for significant wealth accumulation is the primary benefit of investing in cryptocurrency, plus there are other benefits.

Retirement plan sponsors are looking to provide the service based on customers’ demand. Offering cryptocurrency under a 401(k) plan would also relieve employees of the burden and headaches of holding and trading cryptos for themselves.

Empirical data shows that crypto components have the ability to significantly increase the yield of a pension fund portfolio, though such enhancement of yield comes at slightly higher risk levels.

According to Mr. Chok, “It’s not about putting 100% of your retirement fund into digital assets. It simply has a balanced portfolio. If you have 5% in crypto for example, a non-inflationary asset, and it appreciates over 30%, this will still have a huge impact on a portfolio without putting a dent on it if something were to happen to your chosen asset. So, the potential for upside is significant.”

“If you lost everything, it’s 5%. it won’t hurt your portfolio. You still have an account comparable to standardized government pensions.” 

The executive said that the increase in risk can be mitigated by adding an actively managed crypto-component to the portfolio rather than a passive investment product.

Crypto Retirement Portfolio Outlook

Bitcoin is certainly an alluring investment opportunity because of the potential to make substantial profits. Nothing explicitly prohibits plan fiduciaries from offering the crypto under a retirement plan.

Employees and retirees can invest in Bitcoin through their IRAs as there is no legal prohibition against doing so. However, such employees and retirees should evaluate the risks and obtain professional advice through their preferred trading platforms while making such investments.

LOST’s entry into the metaverse with LOST Island will provide users with game-changing escape game experiences as the company has initiated various upcoming initiatives, the company told Blockchain.News.

Rick Woo, Co-Founder, LOST 

LOST became the first escape room game to enter the metaverse in April 2022, and the company is creating an infinite escape game through the LOST Island metaverse.

“Gamers will be experiencing OMO (online merge offline) escape game as an ultimate adventure,” LOST told Blockchain.News in an interview. 

To gain access to the LOST Island, participants of the game will have to connect a digital wallet with a wearable which will be used to unlock riddles.

The game has adopted LOST Token as the cryptocurrency.

The first of its kind metaverse escape room game experience will be in play-to-earn and play-to-learn models. These features will enable brand gamification for arousing interest in people and awareness, LOST told Blockchain.News.

For players to benefit from the play-to-earn model, they will be required to pass through various stages with multiple puzzles and riddles. While on the game, a player can also find rare items such as weapons, tools or special kits that can be used to crack the locking areas of the game.

The game also allows players to challenge each other to win awards.

Players can also equip their avatars with NFT to hunt different treasures and get rewards with LOST’s tokens. A leaderboard will show each gamer’s result. 

Players can also sell their NFTs in LOST’s marketplace. NFTs could be anything, even something such as a pair of special boots that a player can use to cross a river of lava in the game.

While for the play-to-learn model, the company will be introducing LOST Junior into LOST Island. LOST Junior will be suitable for children aged between 6 to 14, LOST told Blockchain.News.

“Kids can have different takeaway by playing our escape games. For example, we will gamify the historical stories, STEAM education, financial quotient etc. in our game, where kids will be awarding a certificate with CQ (creative quotient) level to endorse their achievement. This certificate will be recorded on a blockchain and being their badges to unlock different achievements in our escape games,” LOST said.

LOST also added that the OMO escape game will allow players an extended experience of the physical game in the virtual world.

In terms of integration of the physical game experience into the metaverse, LOST said: “the integration is seamless, just the escape games’ story has another chapter in the metaverse but totally different challenges and gaming experience. Plus, our team will keep on opening new outlets in different places so that there will be more metaverse entrance for gamers.”

As part of the future plan, LOST is working on a strategy to accept tokens as payment to play the physical version of the games at the store and also purchase merchandise.

LOST added that another major goal for LOST Island’s future is to build a coding academy to allow players or visitors to build their own escape game in the company’s metaverse.

According to Finder’s NFT Gaming Adoption Report, Hong Kong is currently second among 26 countries and regions for play-to-earn (P2E) gaming adoption.

The report stated that 29% of Hong Kong internet users have participated in play-to-earn games and an additional 8% plan to use a P2E NFT game by the end of the year, which means adoption could soon reach 36%. 

India is first with 34%, while the UAE (27%) and the Philippines (25%) came after Hong Kong.

“In Hong Kong, men are more likely to participate in P2E than women. 31% of men said they have played-to-earn compared to 27% of women – a gap of 4 percentage points,” Finder’s report revealed.

The report also further stated that P2E is on the rise worldwide, with adoption set to grow 10% on average. 

Other Recent Metaverse Developments in Hong Kong

In another major metaverse development in the financial hub, HSBC Holdings said it has established a fund to render investment opportunities to its high and ultra-high net worth investors in Singapore and Hong Kong.

Blockchain.News reported that HSBC will pinpoint investment opportunities across five areas in the metaverse ecosystem; infrastructure, interface, computing, experience and discovery, and virtualization through the Metaverse Discretionary Strategy portfolio.

Lina Lim, Asia Pacific’s regional head of discretionary and funds for investments and wealth solutions at HSBC, stated:

“The metaverse ecosystem, while still at its early stage, is rapidly evolving. We see many exciting opportunities in this space as companies of different backgrounds and sizes are flocking into the ecosystem.”

Last month, HSBC entered the metaverse ecosystem after partnering with Sandbox, a blockchain gaming platform.

As a result, it became the second global bank after JPMorgan Chase invested in a metaverse platform. Through the partnership, HSBC acquired a plot of LAND, the virtual real estate in The Sandbox metaverse, which it would develop for engagement, entertainment, and connection purposes.  

According to a recent report by Citi, the metaverse is expected to move away from the confines of a video game played on a virtual reality headset to become an “Open Metaverse” that would be owned and governed by a community.

Image source: Shutterstock

A study shows that 90% of surveyed central banks worldwide are exploring the future issuance of central bank digital currencies (CBDCs). Blockchain.News interviewed industry experts to find out the outlook of Hong Kong’s digital currency and its potential adoption.

The outlook of e-HKD

In a recent discussion paper published by The Hong Kong Monetary Authority (HKMA), the de facto central bank reached out to the public to consult on the development of retail central bank digital currency (rCBDC) or the digital Hong Kong Dollar (e-HKD). The discussion paper lists a wide range of issues with a dozen key questions covering a wide range of issues:

•  The potential benefits and challenges of e-HKD
•  The balance between privacy and illicit activities prevention
•  Interoperability with the existing payment system
• Considerations in terms of legal, design and policy perspectives
• The level of participation by the private sectors 

The role of e-HKD

The rCBDCs can be divided into two-tier distribution models: the wholesale interbank system and the retail user wallet system, according to the e-HKD technical whitepaper.

“The wholesale CBDC is used for transfers between the central bank and commercial banks or other institutions, while the retail CBDC is used for transfers between commercial banks and the general public for retail transactions,” Professor Chew Seen-Meng, Associate Professor of Practice in Finance and Associate Dean (External Engagement) of the Chinese University of Hong Kong (CUHK) explained.

Regarding retail CBDCs, a doubt that could arise among the public could be why the market still needs another digital payment tool among other diverse options in HK?

Chew, the former economist for the Singapore office of the International Monetary Fund (IMF) and Morgan Stanley, acknowledged that “it is true that there is no urgent need for a digital HKD.”

However, “having an e-HKD could make our lives even more convenient by eliminating the need to carry physical notes and coins around and enables virtually all payments to be made by just tapping the mobile phone” in the long term, Chew said.

Moreover, “the transmission mechanism of monetary policies from the HKMA can become more efficient through the e-HKD,” Chew added.

Furthermore, the scholar believes digital currency could provide a faster and more convenient way to transfer value by supporting more economic activities potentially if the digital currency is accepted as a medium of exchange by the public in the long term.

“Since the e-HKD’s value will be controlled by the HKMA, it is already a kind of stablecoin. To the extent that the HKMA is able to maintain the stability of e-HKD’s value through algorithms or its forex reserves, the risk of the e-HKD plummeting in value should be quite small.”  

Currently, a plethora of payment platforms has already captured the market.

E-wallets with Peer-to-Peer (P2P) payment functions are becoming mainstream in Hong Kong.

In e-commerce alone, digital wallets are expected to account for 40 % of the city’s online transaction value by 2025, overtaking credit cards, according to the 2022 Global Payments Report by the US financial technology company FIS.

In an exclusive interview with Blockchain.News, Etelka Bogardi, Partner of Asia lead of Global Payments and Fintech Practice, Norton Rose Fulbright Hong Kong, told the media outlet that “one of the primary design considerations should be interoperability with existing systems.”

Bogardi, a Hong Kong-based financial services regulatory lawyer and the former Senior Counsel to the Hong Kong Monetary Authority, suggests the regulator should beware of the impacts of the e-HKD on banks and any potential disintermediation effects, given that Hong Kong’s status as an international financial centre and the large presence of the financial sector.

Meanwhile, Chew also shared a similar view and added that “with so many payment options in Hong Kong, the interoperability between e-HKD and all the existing payment systems needs to be fully ensured and secured before e-HKD is launched.”

“Unless e-HKD can address some pain points of the current e-Payment services or is much more convenient than the existing e-Payment options, it would be hard for e-HKD to be embraced by the public among the plethora of retail payment options in Hong Kong,” Bogardi added.

Through the paper, the HKMA reiterates that “the purpose of developing e-HKD is not to replace existing payment methods” but to “avoid creating a closed-loop payment system, which impedes payments made between e-HKD users and users of other payment systems.”

The rCBDC is expected to provide connectivity among other payment service providers, for instance, cross-platform payments to be conducted efficiently.

Token-based or Account-based?

The balance between privacy protection and data access is another crucial consideration among systematic issues. The discussion paper mentioned that the key design feature of e-HKD to consider is whether it is issued token-based or account-based.

According to the paper, the token-based would allow more anonymity in payments between various parties, protecting against abuse of individual data by commercial entities. Still, it could be risky to facilitate illicit activities.

On the other hand, the account-based approach would “require the recording of balances and transactions of rCBDC holders. This approach would rely on the ability to verify the identity of the account holder and could help comply with AML/CFT requirements.”

Both approaches require a ledger to complete transactions with distributed ledger technology (DLT) and tokenization, which could be structured to trace users depending on the degree of anonymity and access of information to parties.

However, Prof. Chew said that the traceability of digital currency from the regulator indicates that small retailers such as taxi drivers might be reluctant or not interested in changing their behaviours or habits of transactions due to taxation concerns.

The regulator said the “full anonymity is not plausible,” e-HKD should comply with existing laws and ordinances. Its legal mandate and legal tender status would logically align with the currency system.

“Overall, whilst there would need to be some work done to accommodate an e-HKD in the existing legislative framework of currency issuance and related issues, these are not insurmountable obstacles. Some of the more technical legal issues raised relate to the application of effective AML controls and data privacy laws. In that sense, the discussion around having a two-tier issuance and distribution structure is very beneficial,” Bogardi explained.

Global adoption of CBDCs

Over the past two years, the global market was trapped by uncertainties amid the COVID-19 pandemic.

Amid the turmoil, the increasing demand for raising cross-border payments efficiency and the emergence of cryptocurrencies, such as stablecoins and other tokens, also gave rise to regulatory challenges, pushing global governments to update their currency policy in response.

According to the latest report published by the Bank of International Settlement (BIS), 90% of surveyed central banks worldwide are exploring the issuance of central bank digital currencies. The financial institution added that around two-thirds of central banks surveyed would take issuing retail CBDC into account in the near future.

In 2020, the Bahamas became the first sovereign nation to issue CBDC, called the “Sand Dollar”, as the pioneer in adopting a new form of currency, driven by its geographical and the cost of delivering currency on its land.