Hong Kong Authorities Block Access to JPEX Amid Ongoing Investigation

Gate.HK, cryptocurrency exchange Gate.io’s Hong Kong entity, is discontinuing its operations and has retracted its application for a crypto trading platform license with the local regulator. The company announced on Wednesday a planned "major overhaul" of its platform and has ceased new user registrations and deposits immediately. In compliance with local regulations, Gate.HK will delist all tokens—including major ones like Bitcoin, Ether and USDT—on May 28, urging users to withdraw their assets by August 28. The trading platform, which launched officially in May 2023, aims to re-enter the Hong Kong market in the future after securing the necessary approvals and contributing to the virtual asset ecosystem.Photo by Kelly Sikkema on UnsplashRegulatory environment and industry responseThe withdrawal of the license application, initially submitted in February 2023, was noted on the website of the Hong Kong Securities and Futures Commission (SFC) on May 22, without a disclosed reason for the withdrawal. The SFC mandates that crypto trading platforms without a submitted license application by Feb. 29 must shut down by May 31 or within three months upon receiving further notice. This regulation has impacted several platforms, including HKVAEX and Huobi HK, both of which have recently withdrawn their license applications and ceased operations or faced operational uncertainties in the region. Currently, the SFC is reviewing applications from 20 crypto firms, indicating significant interest among global exchanges in securing retail trading licenses in Hong Kong. 

First Digital to Introduce USD-Backed USD StablecoinFirst Digital Trust, a Hong Kong-based qualified custodian and trust company, is set to introduce a new stablecoin called “First Digital USD,” with the short-code $FDUSD. This stablecoin will be pegged to the US dollar but regulated within Asia.Photo by Alexander Grey on UnsplashIntroducing $FDUSDAccording to First Digital, $FDUSD will be backed by one US dollar or an asset of equivalent fair value on a one-to-one basis. The reserves supporting FDUSD will be held in segregated accounts at institutions in Asia.$FDUSD aims to provide stability and will be programmable, enabling the execution of financial contracts, escrow services, and insurance without the need for intermediaries. In a statement published on Thursday, First Digital emphasized its commitment to full compliance with current and future laws and regulations. The company also expressed its intention to participate in shaping the regulatory landscape for $FDUSD and First Digital itself.The announcement of $FDUSD is particularly significant in light of the new “Guidelines for Virtual Asset Trading Platform Operators” set to take effect in Hong Kong on June 1. These guidelines outline rules for safe asset custody, client asset segregation, conflict of interest avoidance, and cybersecurity standards, as mandated by Hong Kong’s Securities and Futures Commission (SFC).Hosted on BNB Smart ChainFDUSD will operate on the BNB Smart Chain and will be issued by First Digital Labs, a subsidiary of First Digital Trust, a regulated digital asset custodian under the Hong Kong Trustee Ordinance. The law ensures that $FDUSD will be fully backed by US dollar reserves or highly liquid, high-quality assets held in regulated Asian financial institutions, with no commingling with other assets of First Digital.Vincent Chok, CEO of First Digital, emphasized the company’s commitment to regulatory compliance and setting a new standard for legitimacy in the industry. First Digital intends to comply with all applicable laws and regulations and actively contribute to the shaping of regulatory regimes for $FDUSD and First Digital in the future.The $FDUSD stablecoin will be redeemable for US dollars, providing users with a reliable bridge between the digital and fiat currencies.Biden administration's own goalAs regulatory uncertainty persists in the United States, some industry players are expressing concerns about losing the country’s leadership position in the crypto sector. They warn that the industry may be offshore to more favorable jurisdictions.News of First Digital Trust’s US dollar stablecoin intentions brought scathing criticism of US policy from US commentators within the crypto space. Austin Campbell, Managing Partner at Zero Knowledge Consulting, a firm that advises on crypto payments and stablecoins, stated that the US government and US regulators had created a paradigm where they now have less control over distribution and regulation while the product they were suppressing continues to exist and scales elsewhere.Nic Carter, Partner at venture capital firm Castle Island Ventures, wrote that “the wise sages in US government took one look at the onshore registered stablecoin market and decided they’d much prefer unaccountable offshore crypto-eurodollars.”Macro-economist Luke Gromen described this consequence of US policy as the “monetary equivalent of deciding they would prefer making their goods in China rather than paying US workers and deal with union labor.” Meanwhile, Caitlin Long, Founder and CEO of digital asset-focused Custodia Bank, suggested that US federal regulators “thought they could kill USD stablecoins” but that “they miscalculated.”

Su Zhu, the co-founder of the now-defunct Singaporean crypto hedge fund Three Arrows Capital (3AC), raised some eyebrows within the crypto community recently, having shared unconventional thoughts on his time spent in a Singaporean prison. Zhu's arrest took place in October of last year in Singapore, where he was apprehended while attempting to flee. Liquidators of 3AC had tipped off police in the city-state that Zhu was going to Changi airport, a number of days after they had secured a court order against him for failing to cooperate with their efforts to wind up the company. Alongside his business partner, Kyle Davies, Zhu was sentenced to four months in prison for contempt of court following a committal order.Photo by Christian Lue on Unsplash‘Enjoyable experience’Clips from an unreleased podcast were published on social media on Monday, in which Zhu referred to his time in prison as an "enjoyable experience overall." In the video podcast, Zhu expressed gratitude for his incarceration, even going so far as to claim that he had the "best sleep" of his life while behind bars. Zhu suggested that everyone should have the opportunity to experience prison at least once, believing it to be a beneficial and enlightening experience. He provided insights into his daily life during incarceration, emphasizing the simplicity of entertainment and drawing parallels with activities from "ancient days." The disgraced crypto boss discussed the routines and privileges within the prison facility, including access to ample reading material, opportunities for exercise and a structured diet. He highlighted the ability to read books and engage in physical activities like push-ups during his time in prison. What particularly impressed Zhu was the quality of sleep in the prison environment. He also found a sense of connection with his ancestors through the use of mats instead of beds. Crypto community responseCrypto users on various platforms responded with mixed feelings toward Zhu's philosophical insights. Some viewed his perspective with skepticism, while others found humor in the apparent contrast between his experiences and traditional notions of imprisonment. Taking to the X social media platform, pseudonymous crypto restructuring lawyer "Wassielawyer" wrote:”Singapore prison is widely regarded as one of the shittiest prisons you can find in a first world country. And the man made it sound like a 5-star mindfulness retreat everyone needs to go on in order to revitalize mind, body and soul. Man is blessed with a superpower…” The hedge fund collapsed in June 2022, resulting in over $3.5 billion in losses for investors, making it one of the largest hedge-fund trading losses ever. Zhu and fellow 3AC founder Kyle Davies have been active online over the course of the past year, despite their whereabouts largely remaining unknown during that time. The duo have launched a new crypto exchange and bankruptcy claims platform called Open Exchange (OPNX). However, their troubles continue, as liquidator Teneo seeks to recover $1.3 billion directly from the founders, alleging misuse of investor funds after 3AC became insolvent. In September, the Monetary Authority of Singapore (MAS) prohibited both from floating regulated investments for nine years. Teneo has estimated a 46% recovery rate in respect of creditor claims.