Hong Kong Adapts Crypto Regulations to Broaden Market Access

Kazakhstan shuts out 980 non-compliant crypto exchanges in 2023Kazakhstan has implemented stringent measures in 2023 when it comes to regulating the crypto sector, resulting in the closure of 980 crypto exchanges that failed to comply with government regulations.That’s according to a press release published by the Central Asian country’s Financial Monitoring Agency (FMA), the state entity responsible for anti-money laundering (AML) policy. These measures, taken over the course of the year, were highlighted during the 39th Plenary Week of the Eurasian Group (EAG) in the resort city of Sanya, in Hainan province in China.Photo by Kuralbek Djumagaziev on UnsplashCombating money laundering threatsThe seminar served as a platform for participating countries to exchange experiences, with an emphasis on leveraging advanced technologies, including artificial intelligence, to effectively combat emerging threats related to money laundering and terrorist financing. The Kazakhstani delegation played a leading role in discussions on virtual assets.Ruslan Ostroumov, the Head of Kazakhstan’s Financial Monitoring Agency, showcased the country’s legislative regulations and robust measures to combat the illegal turnover of digital assets. Ostroumov reported the blocking of 980 illegal cryptocurrency exchange platforms in the current year. Additionally, nine investigations into illegal exchange operations, amounting to $36.7 million, have been initiated, accompanied by ongoing preventive measures.Registration process complexityWhile the seminar’s organizers commended Kazakhstan for its proactive stance against financial crimes in the virtual assets space, the country’s crypto laws have added complexity to the registration process for exchanges.In November, the Kazakhstani authorities blocked local access to the Coinbase website due to potential violations of the country’s digital asset legislation. This decision aligned with the law on digital assets, effective since February 2023, which prohibits the issuance and trading of digital currencies and cryptocurrency exchange businesses without proper licensing.While challenges remain for crypto platforms within Kazakhstan, some have been successful in their efforts. In May, crypto derivatives trading platform Bybit was successful in gaining approval to offer its services within the country. Binance followed suit in June, securing preliminary approval. Other platforms such as CaspianEx, Biteeu, ATAIX, Upbit, Xignal and MT have been granted permission to conduct trade in Kazakhstan.In December 2020, Kazakhstan formally legalized cryptocurrency mining, and on May 6, 2021, the National Bank of Kazakhstan announced plans to issue a “digital tenge,” their version of a central bank digital currency (CBDC). Various CBDC-related projects have followed. In September, the National Payment Corporation, an entity which will be responsible for CBDC development, was launched. The same month, the National Bank of Kazakhstan entered into a collaboration with financial messaging service SWIFT to work on an interoperable CBDC connector.For the most part, these comprehensive regulations and the issuance of a CBDC signify Kazakhstan’s broader acceptance and adaptation to the cryptocurrency landscape. Authorities internationally are trying to find a balance between adequate regulation and enabling innovation to take place. Kazakhstan is no exception, and with that, there are bound to be challenges as regulatory frameworks are optimized and tweaked along the way.

The United Arab Emirates (UAE) is updating its tax policy such that cryptocurrency-related transfers and conversions will be exempt from value-added tax (VAT).  News of the policy change emerged via the UAE’s Federal Tax Authority (FTA), which published an Arabic version of the updated tax code on Oct. 2, followed by the publication of an English version on Oct. 4.Photo by Darcey Beau on UnsplashExemption backdated to 2018British multinational consulting firm PricewaterhouseCoopers (PwC) published a review of the UAE tax code update on Oct. 4. The auditing firm noted that virtual assets are defined within the UAE tax code as a “representation of value that can be digitally traded or converted and can be used for investment purposes.”It noted that Article 42 of the update dealt with the crypto VAT exemption. The firm suggested that entities dealing with crypto should “analyze the impact of the exemption on their (retrospective) VAT position, especially in respect to their input tax recovery,” adding that voluntary disclosures may be required to correct previous tax returns. Additionally, a VAT exemption has been introduced on services extended to fund managers relative to licensed funds. Younis Haji Al Khoori, a UAE Ministry of Finance official, stated that the amendments have been made with a view towards easing the burden on businesses. He stated:“These amendments help minimise misunderstandings, simplify procedures, and ultimately contribute to an improved quality of life for all.”  Crypto-friendlyAbdulla Al Dhaheri, CEO of the Blockchain Center in Abu Dhabi, commented on the development on X, stating:”The UAE, driven by visionary leadership, continues to set the global standard by becoming the number 1 destination for blockchain innovation. With the elimination of VAT on crypto transfers and conversions, the UAE reinforce their commitment to building a world-leading digital economy, attracting the best talent and investment from around the globe.” The UAE, and particularly Dubai and Abu Dhabi, have taken great strides forward in ensuring regulatory clarity for the virtual assets sector over the course of the past two years. Regulatory frameworks have been put in place, leading to many participants in the crypto sector praising the regulatory stance taken within the UAE.  This latest addition has equally being welcomed within the crypto sector. Many crypto sector participants have highlighted it as a wake-up call for other jurisdictions to follow suit or see crypto enterprises move to the UAE.  The Indian authorities, in particular, have an unfavorable tax policy in place relative to digital assets, with a 1% tax deducted at source (TDS) being applied. This latest development in the UAE prompted some to consider if India would learn from the UAE’s example. Earlier this year, the Indonesian tax framework, which subjects crypto assets to both income tax and VAT, was cited as the main reason for a slump in crypto trading. A recently published report by blockchain data platform Chainalysis found that the Middle East & North Africa (MENA) region accounts for 7.5% of crypto trading volume, with the report noting that the UAE, alongside Saudi Arabia, is showing a strong interest in decentralized platforms.

UAE Accelerates Cross-Border Payments with JPMorgan’s OnyxFirst Abu Dhabi Bank (FAB), the largest bank in the United Arab Emirates (UAE), has ventured into the world of blockchain technology through a partnership with JPMorgan and its Onyx blockchain.Photo by Kamil Rogalinski on UnsplashFast tracking cross-border transactionsInternational financial transactions have long been afflicted by intricate procedures and snail-paced response times. These challenges have been particularly acute when it comes to cross-border payments. In response, FAB will utilize JPMorgan’s Coin Systems in order to expedite and streamline such cross-border payments.Powered by blockchain technology, JPMorgan’s Coin Systems advocates for swift transfers and settlements through a secure, distributed ledger. This collaboration between FAB and JPMorgan’s Onyx division was announced via a press release published on Tuesday (local time).The initiative represents FAB’s efforts towards leveraging cutting-edge technology, while improving and redefining the customer experience. While the initial testing phase was a success, it’s merely a prologue to FAB’s broader plans to utilize the technology for global transactional banking.With assets totaling AED 1.1 trillion ($312 billion) as of mid-2023 and laudable ratings from Moody’s, S&P, and Fitch, FAB maintains a significant presence in banking in the Middle East region.Onyx blockchainJPMorgan launched its Onyx blockchain in 2020 as a permissioned blockchain network. It is understood that the network processes daily transactions to the value of between $1 billion and $2 billion through partnerships established with banks in the Middle East, Europe, and India. Among the services offered by Onyx Digital Assets are tokenized US treasury bonds and mortgage-backed securities alongside its JPM Coin.JPMorgan is not alone in terms of top-tier banks and financial services firms who are delving into the world of blockchain. Rivals such as Citi announced its Citi Token Services product offering in September. It’s a blockchain-based service that utilizes tokenized deposits for the purpose of trading and providing liquidity.Meanwhile, payments firm Mastercard announced that it was performing testing on its Multi Token Network in June. For its part, JPMorgan has also been a participant in Singapore’s Project Guardian, a collaborative initiative led by the Monetary Authority of Singapore in conjunction with the financial services sector, centered on asset tokenization.Bahrani partnershipThis latest collaboration follows hot on the heels of JPMorgan’s partnership with another Middle Eastern bank last month. Bank ABC, which is headquartered in Bahrain, became the first Middle Eastern bank to utilize JPMorgan’s Onyx Coin Systems for faster cross-border payments.That initiative also had the support of Bahrain’s central bank. At the time of the launch of the collaboration, Central Bank of Bahrain Governor Rasheed Al Maraj stated:”After working closely with JP Morgan and Bank ABC over the past two years to experiment with cross-border commercial transactions between Bahrain and the US, leveraging the JP Morgan Coin System, we are pleased to witness the soft launch of this innovative banking solution by a Bahraini-based bank.”