Buoyed by growing government and public interest, Hong Kong's blockchain-concentrated startups are building a new ecosystem as they prepare for a paradigm shift in finance.

"We want to develop our ecosystem as a bridge between the traditional finance system to the new digital era," Irene Wong, founder and chief executive of blockchain-based finance startup ixFintech, told Business Times.

A recent rally in the price of bitcoin has put cryptocurrencies - and the blockchain system that powers them - has renewed interest in the industry, exposing the wide gap between today's digital finance and traditional systems of the past.

"We are trying to develop something that Hong Kong might need in the future so we can stay competitive with the world," said Wong, who founded ixFintech in 2015 and hopes to work with other startups and the government to create a digital financial system in the city.

Unlike other financial centers like New York, Switzerland and Singapore, Hong Kong regulators have been slow to capitalize on blockchain's potential value, which is not surprising given the high stakes at play.

"As a very established financial center, they must think carefully because they don't want to lose what they have," she acknowledged.

But the government hinted this week at loosening restrictions on financial technology startups, which could be a boon to companies in the cryptocurrency industry.

"The HKMA is considering improving its Fintech Supervisory Sandbox," Hong Kong financial secretary Paul Chan said in his annual budget address Wednesday.

Vetting and additional funding arrangements will be offered to "promising fintech solutions" he said, as a way to reduce launch time for financial products developed by local startups.

Larger financial institutions around the world are keen to develop their own blockchain-based digital currencies as well.

On Thursday, Chinese and Emirati central banks joined their counterparts in Hong Kong and Thailand in a project to encourage cross-border foreign currency payments using blockchain technology.

The project, now entering its second phase, will see the participating institutions evaluate and refine a proof of concept prototype for wider market use in the future.

"The beauty of the blockchain system is that it is direct buyer to seller without a central party - this is why it is so transparent and instantaneous," Wong explained.

Wong herself has a background in traditional finance and previously worked at HKEX managing the Hang Seng Indexes Company before founding ixFintech six years ago.

But as with most startups in the city, she still struggles with establishing credibility in the local finance industry. Like any young company, finding "resources and capital is not easy," said the entrepreneur.

ixFintech faces another challenge unique to the cryptocurrency world, because of the scale of its ambitions. "This is a very 'mega' project because we are building an entire ecosystem," Wong explained.

A November proposal by Hong Kong's Securities and Futures Commission to bar investors with less than HK$8 million ($1.03 million) in assets from trading cryptocurrencies could present a small hurdle, but she remains confident.

If retail investors are banned, Wong and her colleagues will turn their eye to other potential customers.

"We will focus on institutions by offering only to professional investors' funds," she said. "We already have a mining fund and an index fund that we only offer to professional investors."

Institutional investors pay a license to use the ixFintech index and the company is also in the process of launching funds from which they will take performance and management fees.

Earlier this month, ixFintech launched a version of its digital asset exchange machine in Kennedy Town, enabling users to buy cryptocurrencies that are accessible via digital crypto-wallets on their mobile phones.

Phones are what Wong's machine seems to be competing against.

"Most of the people that have come into our shop to use the machine are middle aged or elderly," said Wong. "I have a wild guess that the youngsters prefer trading on the internet or smartphones."