2021 Chairman's Statement (English)
Get Prepared Today for Tomorrow
2021 is destined to be another extraordinary year for Oriental Culture Holding Ltd (“Oriental Culture” or the “Group”). We not only delivered strong financial results amid challenges from COVID-19 pandemic, but also set new records, which is the best gift to celebrate our first anniversary of listing on Nasdaq.
Review and Outlook
The Group’s operating revenues for 2021 increased by 115.6% to US$37.6 million, and net incomes increased by 458.8% to US$11.4 million, both record highs. The art and collectible market has bounced back and our business operation has returned to normal as COVID-19 pandemic has mostly been under control in China, and the positive global financial market sentiment resulting from the optimism around vaccine rollout, encouraging signs of early economic recovery, and continuing government stimulus measures, fueling global market confidence. Thanks to the encouraging market environment, a record breaking 199 products (2020: 188) were newly listed on our two trading platforms, and the number of new accounts this year were more than double to last year.
Looking forward, we are optimistic on the Group’s future development due to the emergence of Metaverse and the new position of Hong Kong to become an East-Meets-West Centre for International Cultural Exchange.
Metaverse a next generation internet
Leveraging on the Group’s increasing strength in the trading of physical artworks and collectibles, we saw tremendous opportunities arising from the integration between physical and virtual collectibles, thanks to the emergence of Metaverse and NFT.
Facebook CEO Mark Zuckerberg made a bold decision to rebrand its parent company as Meta in October 2021, and Microsoft announced to buy video game giant Activision Blizzard in a $68.7 billion all-cash deal to obtain building blocks for the metaverse in January 2022, placing the metaverse further in the global spotlight. The metaverse is basically a digital world created by technologies such as virtual reality and augmented reality. As a concept, it is still in its infancy. There is still no universally acknowledged definition for metaverse, but it is considered by many as the next generation internet.
The market has been gripped by the concept of the metaverse, with leading tech players and startups viewing it as trillion-dollar business opportunity.
Bloomberg Intelligent forecast metaverse revenue opportunities globally could reach nearly US$800 billion in 2024, while PwC predicted US$1.5 trillion boost to the global economy by 2030.
We believe metaverse is not just about creating a virtual world, it promises a future where the virtual and physical worlds are inextricably interconnected, which will bring not only changes to lifestyles, but also great opportunities for industrial upgrading, especially integration of the real and digital economies.
Sensing the promising future, governments are also moving quickly to promote the metaverse. For example, Barbados announced in November 2021 to open a “metaverse embassy” on Decentraland, a US virtual world website that bills itself as prototype for metaverse platforms, and South Korea announced at the same time to establish Metaverse Seoul, a next generation platform that will include a virtual city hall, tourism areas and social service centers. Meanwhile, China called for more efforts to guide enterprises in stepping up research into important platforms for interaction between the virtual and real world, and to place more emphasize on using the metaverse to boost the development of the real economy.
From Collectibles to Investables and futher to consumerables
“Being a leading platform for the trading of artworks and collectibles, what is Oriental Culture’s metaverse strategy?” This is our most frequently asked questions in the market. The question itself means what the market expects of us. In fact, it is also the question we are thinking of everyday as we know how important it is for the Group to be relevant to metaverse.
There are many ways on tapping into the metaverse ecosystem. Being a leading platform for the trading of artworks and collectibles, we may not be ready to get involved in the hardware and software market which normally require yearslong and heavy capital investment, we may become a NFT product provider to cater for the investment and consumption demands in the metaverse.
Since our establishment in 2018, we have successfully turned stamps, coins, paintings and artworks from “collectibles” into “investibles”. Going forward, we may try to turn “investables” into “consumerables” to allow collectors, artists and art dealers and owners to access a much bigger art trading market with a wider range of collectibles and artwork investors, especially the young artists and collectors.
NFT a game-changer in collectibles industry
Whether traditional auction houses or emerging virtual asset trading platforms, investment enthusiasm in 2021 is inseparable from Non-Fungible Token (NFT). Where Bitcoin was hailed as the digital answer to currency, NFTs are now being considered as the digital answer to collectibles. NFTs are "one-of-a-kind" assets in the digital world that can be bought and sold like any other piece of property, but which have no tangible form of their own. The digital tokens can be thought of as certificates of ownership for virtual or physical assets.
Christie's sale of an NFT by digital artist Beeple for US$69 million in March 2021 not only set a new record for digital art, but also embarked the market interest. According to DappRadar, which tracks sales across multiple blockchains, NFT sales volume surges by over 260 folds to $24.9 billion in 2021, compared to just $94.9 million in 2020. DappRadar also said that wallets trading in NFTs, which is also considered as the number of active NFT traders, saw a rise to about 28.6 million in 2021, up by more than 50 times from some 545,000 in 2020.
Moreover, NFTs have proved attractive to young and crypto-savvy audiences who weren’t previously acquainted with art investment. Christie’s, the first auction house to sell NFT art, sold more than 100 NFT artworks in 2021, amounting to a whopping $150 million in sales, and almost half of the NFT sales at Christie’s were made by collectors under the age of 40. While NFTs, at core, are a technology that exists on the blockchain, what they represent to the art market is a new form of art consumption.
In addition to the potential benefits resulting from the technological advancement, we saw opportunities from Hong Kong’s new strategical positions.
Hong Kong An East-Meets-West Centre for International Cultural Exchange
The Chief Executive of Hong Kong delivered her fifth annual Policy Address with the theme of "Building a Bright Future Together" on October 6, 2021, setting out her plan for the future of the city. The Policy Address proposed initiatives to support the development of sectors with good growth potential in which art and cultural industry is one of the highly supported industries.
As stated in the Policy Address, the government has committed to develop Hong Kong into an East-Meets-West Centre for International Cultural Exchange. To realize the new cultural positioning, the government has pledged to work on five directions, namely developing world-class cultural facilities and a pluralistic cultural environment; strengthening connections with overseas arts and culture organizations; enhancing cultural exchange and co-operation with the Mainland China; leveraging technology; and nurturing talents. In addition, a brand-new Culture, Sports and Tourism Bureau will be established to consolidate the culture portfolio and creative industries.
We strongly welcome and support the government’s new initiatives and are confident to contribute to develop Hong Kong into an East-Meets-West Centre for International Cultural Exchange. We will follow closely on the implementation progress and the introduction of new policies so as to identify how to be relevant and how to grasp the new opportunities.
Hong Kong an international crypto hub
We believe Hong Kong may have the potential to become an international hub for crypto assets. The city has one of the highest percentages of people in the world that hold and also trade in cryptocurrencies, and many leading crypto asset exchanges and asset management firms have business presence or headquarter in Hong Kong, providing the core elements for becoming an international hub for crypto assets.
Hong Kong is one of the early pioneers in coming up with a comprehensive policy response to the emerging crypto assets. On May 21, 2021, the Hong Kong Financial Services and Treasury Bureau concluded that local anti-money laundering law should be amended to mandate all centralized crypto asset trading platforms to be licensed by the Hong Kong Securities and Futures Commission. On January 12, 2022, another financial regulator, the Hong Kong Monetary Authority, issued a discussion paper on crypto assets and stablecoins, setting out its thinking on the regulatory approach for crypto assets particularly payment-related stablecoins, and inviting views from the industry and public on the relevant regulatory approach.
For decades, Hong Kong has been a city of trade and commerce, of creativity and innovation, and most importantly, an international financial center. Hong Kong’s financial system is characterized by its sound regulatory and risk management. By establishing a clear and friendly legal and regulatory framework toward financial innovation and leverage on its vast pool of traditional financial assets and wealth, Hong Kong has the high potential and capability to cultivate an ecosystem for crypto assets and stablecoins and to become an international crypto hub.
Oriental Culture a beneficiary in the new digital era
Embracing innovation and technology, we believe NFT and other crypto assets provide Oriental Culture a brand-new market with huge business opportunities. We will follow closely the development of regulatory framework as well as the licensing requirements in Hong Kong so as to improve our metaverse strategy.
Finally, on behalf of the Board of Directors, I would like to express my sincere gratitude to the staff of the Group for their dedication to their duties and outstanding performance, enabling the Group to achieve another successful and extraordinary year. At the same time, I would also like to thank the shareholders, for their support and trust in the Group.
April 27, 2022