Regulation
Hong Kong unveils stablecoin scheme, grants copper license, but crypto regulation still a major challenge
Cryptocurrency regulation is a tough nut to crack. Just ask. Author: Gary GenslerBut further on Hong KongCreating a regulatory framework while simultaneously rooting out infected entities is proving to be a huge challenge for authorities.
I’ve never tried, I’ve never failed
Positioned as a regional hub for industry, in direct competition with SingaporeHong Kong had initially outpaced its Asian neighbor by greenlighting cryptocurrency trading in June 2023.
Is Hong Kong’s Liberal Cryptocurrency Regulation Backfiring?
Hong Kong Rethinks Its Licensing Framework Following JPEX Scandal as City Sees Biggest Crypto Theft of the Year, Binance Reinstated, BitBoy Arrested
However, the move quickly backfired as the Jpex scandal, which saw a loss of $1.6 billion, unfolded just a few months later. At least 2,363 victims were scammed by the Hong Kong exchange, which promoted itself through widespread advertising and influencers as a licensed cryptocurrency exchange with 20% returns.
In September 2023, JPEX suddenly suspended its services and announced that it was under investigation by the Hong Kong police for suspected money laundering and fraud. The platform’s website and social media accounts were removed, and the customer service hotline was disconnected.
Civil action launched against JPEX to recover HK$1.8 million
Herbert Lee Sung-him and Chan Wing-yan are the first to file a civil lawsuit against JPEX, which has seen 2,363 victims lose $1.6 billion
Despite the setbacks, Hong Kong has continued to grow and even took a cue from the US by launching its own crypto ETFs a few months ago. However, like many of the city’s efforts, this one has also failed.
Unable to replicate the success of their American peers, Hong Kong cryptocurrency ETFs only took in $12 million in trading volume, and the inflows paled in comparison to the $4.6 billion in first-day inflows for U.S.-based Bitcoin ETFs. Worse, just a few weeks later, those minimal gains were quickly wiped out.
Hong Kong Crypto ETFs Erase Two Weeks’ Inflows in One Day
$32.7 million wiped out of Hong Kong’s crypto ETF market on Monday
Copper License in HK
Hong Kong’s efforts to create a warm and welcoming environment for cryptocurrencies have not gone unnoticed by the industry. On Wednesday, cryptocurrency custody specialist Copper revealed that it has obtained a Trust or Company Service Provider (TCSP) license in Hong Kong.
“This is a key development in Copper’s expansion into the Asia Pacific market. Combining trust and efficiency is central to our institution-first approach,” Dmitry Tokarev, Founder and CEO of Copper, She said.
“This license approval in a major global hub only strengthens this unique offering, highlighting Copper’s compliance with Hong Kong regulatory frameworks and standards,” added Tokarev.
Copper’s ClearLoop network allows clients to oversee collateral and finalise trades across multiple exchanges, minimising counterparty risk and optimising capital utilisation.
Copper Apologizes for Serving Sushi to Scantily Naked Models at Private Party in 5-Star Hotel
Copper’s private party at London’s five-star Mandrake Hotel invited guests to “entertain and explore all five senses”
Stablecoin Stable Plan
In a step toward building a cryptocurrency framework in Hong Kong, regulators have established a new regime for stablecoins. Under the new rules, issuers of stablecoins that track fiat will be necessary to obtain a license from the Hong Kong Monetary Authority (HMKA).
The move comes as part of the conclusions of its consultation on stablecoins. In the two-month public consultation period that ended in February this year, 108 proposals were received from market participants, industry associations, business and professional organizations, and other stakeholders.
Issuers will also be required to publish monthly statements of their capital reserves, provided through a third party.
Secretary for Financial Services and Treasury Christopher Hui said: “In addition to the existing regulatory regime for VA trading platforms, the establishment of a licensing regime for FRS issuers will further strengthen the VA regulatory framework in Hong Kong in line with international standards and effectively mitigate potential financial stability risks associated with FRS issuance activities.”
Trading giant State Street looks to cryptocurrency future with stablecoins and deposit tokens
Their exploration indicates a long-term vision for integrating blockchain into core banking functionality.
The troubles continue
While Hong Kong is certainly making strides in its efforts to collaborate with the industry, cryptocurrency-related crime continues to plague the city.
Earlier this month, the Hong Kong Securities and Futures Commission (SFC) issued warnings against Seven Cryptocurrency platforms for illegally operating in the region without operating licenses: Taurusemex, Yomaex, Bitones.org, BTEPRO, CEG, XTCQT and Bstor.
The warning list highlights exchanges that are not authorized or falsely claim to be associated with Hong Kong.
This year alone, 28 cryptocurrency exchanges have been flagged by the body. All exchanges are suspected of engaging in fraudulent activities and deceiving investors regarding their registration with the SFC.
Furthermore, the Hong Kong police arrested three people earlier this week on charges of defrauding a businessman of HK$3.11 million ($400,000) in cryptocurrency and three bundles of counterfeit HK$1,000 notes. The criminals tricked the 44-year-old into transferring the funds, in Tether, to a designated e-note after showing him what appeared to be a stack of legitimate banknotes.
“With the exception of two genuine notes at the top and bottom of each bundle, the rest were counterfeit notes, known as formation notes,” an insider said.
“After the transfer, the merchant asked to inspect the banknotes. But the employees refused to allow him to check them, claiming that they had not received instructions from the store manager over the phone.”
Indeed, policing crypto crimes is proving to be a real challenge in Hong Kong. But regulation is also under scrutiny.
During a parliamentary session interrogation session Earlier this month, Treasury Secretary Hui said that the HMKA and the SFC are reviewing regulations related to digital assets.
The HKMA and the SFC “will take into account market developments and review the requirements on VA-related activities as appropriate,” Hui said.
Hui made the comments in response to a lawmaker asking whether regulators would speed up the process of reviewing crypto licenses.
Hong Kong reviews ‘overly stringent’ cryptocurrency regulation
Hong Kong’s regulatory overhaul comes amid concerns that its “stringent” laws are driving away cryptocurrency exchanges
Somewhere else
WorldCoin Jumps 45% but Degens Suspects Insider Trading
Worldcoin holders have seen significant gains this week, but is speculation about insider trading weakening their confidence in the project?
Trading giant State Street looks to cryptocurrency future with stablecoins and deposit tokens
Their exploration indicates a long-term vision for integrating blockchain into core banking functionality.
Moody’s Joins Singapore’s Project Guardian to Analyze Tokenized Asset Risks
Working with industry leaders such as Moody’s, MAS aims to establish a robust framework for the issuance and trading of tokenized assets while safeguarding financial stability and integrity.
Standard Chartered’s Zodia Markets Acquires Elwood Technologies’ OTC Division to Enhance Digital Asset Services
Standard Chartered’s Zodia Markets is acquiring Elwood Technologies’ OTC business to expand its presence in the digital assets sector and enable Elwood to broaden its client base
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