UK Watchdog Adds Crypto Exchanges to Warning List

StashAway Malaysia, a Malaysian Securities Commission (SC)-licensed digital investment platform, has extended its market offering to include crypto exchange-traded funds (ETFs) within the Southeast Asian nation. Malaysian daily English language newspaper the Sun reported on Jan. 22 that StashAway will enable Malaysians to invest in two top-tier cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), through its regulated platform.Photo by Traxer on UnsplashFidelity productsThe company is providing its Malaysian clientele access to crypto investment products offered by American multinational financial services company Fidelity Investments. These include the Fidelity Wise Origin Bitcoin Fund (FBTC) and the Fidelity Ethereum Fund (FETH). StashAway Malaysia Country Manager Wong Wai Ken explained the company’s rationale in adding the two products. He stated: “Many of our clients have expressed interest in the long-term potential of major cryptocurrencies like Bitcoin but have been hesitant because of security concerns or the complexities of navigating crypto exchanges. We’re now offering them a familiar and safe way to diversify their portfolios by incorporating crypto through a platform they already know and trust.” On a previous occasion, Wong told the Sun that its role is to help investors to diversify their portfolios. Adding access to cryptocurrency fits that objective. The StashAway executive believes that while there may be growing mainstream adoption of cryptocurrency, many investors are turned off gaining exposure due to the risks involved with self-custody or the fees and counterparty risk involved with cryptocurrency exchanges. StashAway charges management fees ranging from 0.2% to 0.8%. The Fidelity crypto ETF products will be offered with a 0.25% annual management fee.  Last June, Malaysian commercial bank Affin Bank became the first entity to offer a crypto ETF in Malaysia. The bank partnered with local fund management company Cross Light Capital to launch the actively managed digital asset fund. Titled the “Performa Digital Asset Fund,” the product incorporates investment in Bitcoin and Ether exchange-traded products (ETPs), with the remaining third invested in blockchain-related equities. The approval of eleven Bitcoin ETFs in the United States led to greater consideration for the approval and addition of such products internationally. However, in the first few months following the launch of these products, regulators, exchange platforms and asset management firms still remained cautious.  In March of last year, Bursa Malaysia, Malaysia’s stock exchange, dismissed the notion of adding cryptocurrency to its multi-asset exchange. Within the region, regulators in Singapore and Thailand both dismissed the idea of enabling Bitcoin ETFs within their markets.  Since then, Thailand’s regulator has moved closer in its consideration of such a product offering. In the case of Malaysia, earlier this month, the country’s Prime Minister, Datuk Seri Anwar Ibrahim, called for stakeholders such as the central bank to focus on cryptocurrency so that the Southeast Asian nation doesn’t get left behind. StashAway is headquartered in Singapore. Besides Singapore and Malaysia, the company also serves investors in Thailand, the United Arab Emirates (UAE) and Hong Kong. The digital platform has 50,000 users in Malaysia, where it serves retail and accredited investors. The company was the first robo-advisor platform to acquire a Capital Markets Services License from the SC in Malaysia.

Korean Crypto Exchanges Struggle Despite Market RecoveryThe results of a recent study by the South Korean Financial Intelligence Unit (FIU) released on Monday revealed that ten domestic cryptocurrency exchanges have reported zero revenue from transaction fees, with half of them struggling to achieve a daily average trading volume of KRW 1 million ($740).Photo by Maxim Hopman on UnsplashTrends of growth and declineThe study looked into data from 35 registered virtual asset service providers (VASPs) for the first half of this year. The findings showed that compared to the second half of last year, the crypto market capitalization and Korean won deposits increased, but exchanges faced growing challenges, illustrated by a widening gap between leading fiat-to-crypto exchanges and smaller crypto-only exchanges.In the first half of this year, the operating profit of won-based exchanges reached KRW 259.8 billion (approximately $193 million), a 46% increase compared to the second half of last year, which recorded KRW 177.9 billion. In contrast, crypto exchanges recorded an operating loss of KRW 32.5 billion. Notably, out of 21 crypto-only exchanges, 10 of them reported no revenue at all from transaction fees, and 18 were in a state of complete capital impairment. Meanwhile, the operating profit of won-based exchanges was concentrated among the country’s top two exchanges, Upbit and Bithumb.But from a broader perspective, as of the end of June, this year’s total capitalization of the crypto market reached KRW 28.4 trillion — a 46% increase compared to the end of the second half of last year. Korean won deposits also increased by KRW 400 billion, or 11%, compared to the previous half. The overall operating profit was KRW 227.3 billion, up 82% from KRW 124.9 billion at the end of the second half of last year.“The first half of this year saw a rise in prices of virtual assets and investor sentiment, leading to an increase in Korean won deposits, overall market capitalization, and operating profits for exchanges, compared to the second half of 2022,” the FIU remarked.The number of new listings and delistings on virtual asset exchanges also surged with 169 new listings and 115 new delistings. These represented a more than double increase and a 47% increase, respectively, compared to the second half of last year. 66% of the delisted crypto assets were coins that had been exclusively listed on a given exchange.Despite the market’s recovery, trading volume and the number of users have slightly decreased. The daily average trading volume in the domestic crypto market for the first half of this year was KRW 2.9 trillion, down 1.3% compared to the second half of 2022. In addition, the number of registered accounts with VASPs also dropped by 19% to 9.5 million compared to the end of last year. This can be attributed to a growing number of dormant accounts and the removal of duplicate accounts.The quantity of verified users has also declined. The number of individuals and corporations that had completed the mandatory Know Your Customer (KYC) procedures needed to engage in trading decreased by 210,000 to 6.06 million (including duplicates) compared to the end of 2022. The majority of users, or those who own less than KRW 1 million in virtual assets, dropped by 7%.On the other hand, the amount of virtual assets leaving the country increased. In the first half of this year, a total of KRW 22.1 trillion was transferred to whitelisted overseas operators or individual wallet addresses, marking a KRW 500 billion increase compared to the second half of last year. This trend could be accredited to futures trading and arbitrage trading influenced by the so-called “kimchi premium” — a term used to describe the difference between trading prices of cryptocurrencies in Korea and in other foreign exchanges.Age demographicsOther findings showed that the age group that traded the most virtual assets is in their 30s, accounting for 30% of all users. Within this group, men make up 70%, with 1.27 million men recorded as engaging in crypto trading. Following closely with 1.2 million, men in their 40s were the second-largest demographic.

Ant Group Restructuring With Implications for BlockchainAnt Group, an affiliate company of Chinese conglomerate Alibaba, is understood to be undertaking a significant restructuring that could have broader implications for the digital asset industry.Photo by Shubham Dhage on UnsplashPotential IPOAccording to a recent report published by Bloomberg, the company is contemplating a separation of its blockchain and database management services, as well as its international business, from its core financial operations in China. It’s being speculated that the move is a precursor to Ant Group’s application for a financial holding license in China. Furthermore, it could be part of a bid to revive its suspended initial public offering (IPO) in Hong Kong.The company had been under regulatory scrutiny from the Chinese authorities over the course of the past three years. That investigation culminated in a hefty fine of 7.12 billion yuan ($995 million). The consequences of that regulatory investigation have taken a toll on the company’s valuation, plunging from a peak of $280 billion before the IPO cancellation in 2020 to a current estimated value of $79 billion.Blockchain business implicationsBy pursuing this restructuring, Ant Group seeks to refocus on its core financial services within China. It’s unclear what the outcome will be for non-core businesses such as blockchain-based ventures. Potentially spinning these businesses off could unlock hidden value in blockchain-related activities. However, such a move would also raise questions regarding the future of these non-core businesses and their potential impact on the broader digital asset industry.AntChain, the blockchain technology developed by Ant Group, holds a prominent position in China, being widely adopted across various sectors. Should Ant Group decide to spin off or divest this business, it could significantly alter the blockchain landscape in the country.Originally introduced as “Ant Blockchain” in 2017 alongside Alipay, AntChain expanded its services to provide blockchain-as-a-Service (BaaS) to Ant Group’s partners in 2018. In mid-2020, Ant Group took a step further by transforming Ant Blockchain into a separate entity and rebranding it as AntChain. Besides blockchain solutions, AntChain is also actively involved in developing Artificial Intelligence of Things (AIoT), risk control technologies, and other value-added tech services.The wide adoption of Ant Group’s blockchain technology has played a pivotal role in promoting blockchain implementation in China. Last year the company unveiled a blockchain storage engine called Letus, as a mechanism to lower storage costs of blockchain networks. Another project saw it partner with a Malaysian investment bank in an effort to develop a crypto trading and portfolio management app. These are individual instances of the company’s varied activities in the blockchain space.Any alterations to its blockchain operations could impact the pace and scale of blockchain adoption in the country. While the Chinese authorities have discouraged crypto trading and mining, they have very much encouraged blockchain development.The restructuring appears to be a response to the increasing regulatory pressures in the fintech industry. A further tightening of regulations on blockchain operations for fintech companies might potentially hinder innovation and growth in the sector.Most likely the guiding hand of the government in China will have a material effect on how these blockchain-based businesses develop in the event of an Ant Group restructuring that would see them being spun out.