Regulation
Hong Kong unveils stablecoin regime, grants license to Copper, but cryptocurrency regulation remains a major challenge
Cryptocurrency regulation is a tough nut to crack. Just ask Gary Gensler. But over there Hong KongCreating a framework while eliminating rotten entities is proving to be an insurmountable challenge for the authorities.
Already tried, already failed
Positioned as a regional hub for industry, in direct competition with SingaporeHong Kong had initially overtaken its Asian neighbor by giving the green light to cryptocurrency trading in June 2023.
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However, this decision quickly backfired, as JPEX The scandal, which resulted in a loss of $1.6 billion, broke a few months later. At least 2,363 victims were defrauded by the Hong Kong exchange, which presented itself through widespread advertising and influencers as a licensed cryptocurrency exchange with 20% returns.
In September 2023, JPEX abruptly 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 shut down, and its customer support line was disconnected.
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Despite its struggles, Hong Kong has managed to hold its own and even took a cue from the United States by launching its own crypto ETFs a few months ago. However, like many of the city’s efforts, this initiative also failed.
Unable to compete with their American counterparts, Hong Kong crypto ETFs generated just $12 million in trading volume, and the inflows pale in comparison to the $4.6 billion on the first day of Bitcoin ETFs in the U.S. market. Worse yet, just a few weeks later, those minimal gains were quickly wiped out.
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$32.7 Million Wiped From Hong Kong Crypto ETF Market On Monday
Hong Kong Copper License
Hong Kong’s efforts to create a warm and welcoming environment for cryptocurrencies have not gone unnoticed by the industry. On Wednesday, a cryptocurrency custody specialist Copper disclosed that it has obtained a Trust or Company Service Provider (TCSP) license in Hong Kong.
“This is a key milestone in Copper’s expansion into the Asia-Pacific market. Combining trust and efficiency is fundamental to our institutional-focused approach,” said Dmitry Tokarev, Founder and CEO of Copper. said.
“The approval of this license in a key global hub only strengthens this unique offering, underscoring Copper’s compliance with Hong Kong’s regulatory frameworks and standards,” Tokarev added.
Copper’s ClearLoop Network enables customers to monitor collateral and finalize transactions across multiple exchanges, minimizing counterparty risk and optimizing capital utilization.
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Stablecoin Stable Plan
As part of creating a framework for cryptocurrencies in Hong Kong, regulators have established a new regime for stablecoins. Under the new rules, stablecoin issuers that track fiat currencies will be required to obtain a license from the Hong Kong Monetary Authority (HMKA).
This decision follows the findings of the public consultation on stablecoins. During the two-month public consultation period that ended in February this year, 108 submissions were received from market participants, industry associations, trade and professional organisations and other stakeholders.
Issuers will also have to disclose monthly statements of their reserve assets, facilitated by a third party.
Secretary for Financial Services and the 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.”
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The misfortunes continue
While Hong Kong is certainly making strides in industry collaboration, cryptocrime continues to plague the city.
Earlier this month, Hong Kong’s Securities and Futures Commission (SFC) issued warnings against Seven crypto trading platforms to operate illegally in the region without operational licenses: Taurusemex, Yomaex, Bitones.org, BTEPRO, CEG, XTCQT and Bstor.
The alert list highlights exchanges that are unauthorized or falsely claim to be associated with Hong Kong.
This year alone, 28 cryptocurrency exchanges have been flagged by the agency. All of the platforms are suspected of engaging in fraudulent activities and misleading investors about their registration with the SFC.
In addition, the Hong Kong police stopped Three people were arrested earlier this week on suspicion of defrauding a businessman out of HK$3.11 million ($400,000) in cryptocurrency as well as three bundles of fake HK$1,000 notes. The criminals tricked the 44-year-old into transferring the funds, in Tether, to a designated e-ticket after showing him what appeared to be a stack of legitimate banknotes.
“Except for two genuine notes placed at the top and bottom of each bundle, the rest were counterfeit notes, known as formation notes,” a source close to the case said.
“After the transfer, the merchant asked to inspect the notes. But the employees refused to let him check them, claiming that they had not received instructions from the store manager over the phone.”
Combating cryptocrime is indeed proving to be a real challenge in Hong Kong. But even regulation is under scrutiny.
During a parliamentary session interrogation session Earlier this month, Treasury Secretary Hui said the HMKA and SFC were reviewing regulations regarding digital assets.
The HKMA and the SFC “will keep in mind market developments and revise the requirements for AV-related activities as appropriate,” Mr Hui said.
Hui made the remarks in response to a lawmaker who questioned whether regulators would speed up the process of vetting crypto licenses.
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Somewhere else
WorldCoin Jumps 45% But Critics Suspect Insider Trading
Worldcoin holders enjoyed big gains this week, but isn’t insider trading speculation undermining their confidence in the project?
Cryptocurrency Trading Giant State Street Eyes Future With Stablecoins and Custody Tokens
Their exploration indicates a long-term vision for integrating blockchain into core banking functionalities.
Moody’s joins Singapore’s Guardian Project to analyze risks of tokenized assets
By collaborating with industry leaders like Moody’s, MAS aims to establish a robust framework for the issuance and trading of tokenized assets while preserving financial stability and integrity.
Standard Chartered subsidiary Zodia Markets acquires Elwood Technologies’ OTC business to enhance its digital asset services
Standard Chartered subsidiary Zodia Markets acquires Elwood Technologies’ OTC business to expand its digital asset footprint and enable Elwood to broaden its customer base
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