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True Potential of Asian Crypto ETFs Yet to Be RealizedA recently published report by Hong Kong Exchanges and Clearing Ltd. (HKEX), the Hong Kong stock exchange, has found that crypto exchange traded funds (ETFs) have the potential to play a significant part in unlocking the next phase of digital asset expansion in Asia.©Pexels/Burak The WeekenderThe report, titled “Crypto ETF: Key to unlocking the next phase of digital asset growth in Asia,” highlights how crypto ETFs could attract more institutional investors and lead to increased liquidity in the digital asset market. Furthermore, HKEX claims that the ETF investment mechanism can play its part in offering a more regulated and safe manner through which investors can gain exposure to digital assets.Regulatory progressWhile the report cites an Asian regulatory environment that is becoming increasingly more supportive of digital assets of late, it still identifies a need for further progress to be made to improve the level of regulatory clarity and to provide a truly standardized approach to digital assets. That, it says, will result in crypto ETFs becoming more accessible, offering a diversified way in which the investor can access and gain exposure to digital assets in Asia.Nonetheless, HKEX applauds the work done thus far by regulatory authorities in Hong Kong and Singapore, where regulatory frameworks relative to crypto ETFs have been implemented. Those are measures that the Hong Kong stock exchange believes will increase investor confidence, and in turn, bring about further adoption of digital assets.Modest daily trading volumeBetween December 16 and February 7 the two Bitcoin ETFs and one Ether ETF listed on the Hong Kong stock exchange achieved a daily trading volume of $1.19 million. That’s rather underwhelming when compared with the $3 billion in daily volume being achieved by the Chicago Mercantile Exchange (CME) relative to its Bitcoin and Ether futures ETF in the United States. On the New York stock exchange ProShares Bitcoin Strategy ETF achieves a daily average trading volume of $196 million.These findings are a bit counter-intuitive given the contrasting regulatory approaches in the two territories. In the US, regulators have failed to approve a physically settled Bitcoin ETF. Furthermore, the Securities and Exchange Commission (SEC) has denied the attempts of Grayscale Bitcoin Investment Trust (GBTC) to convert the Bitcoin fund into an ETF. Meanwhile, Hong Kong has much more regulatory clarity but yet trading volume in crypto-related ETFs remains minuscule by comparison with the United States.Despite that, the report remains upbeat with regard to what can be achieved in the market with crypto-related ETFs. It makes a case for crypto ETFs as a means for traditional financial institutions to enter the digital assets market with relative ease. Similarly, it sees a role for global stock exchanges in facilitating future growth of crypto-related ETFs and in developing new ETF products that could unlock access to specific digital assets or bespoke investment strategies.

Yat Siu: Hong Kong’s Crypto Adoption Sanctioned by the MainlandIn a keynote speech at the Ethereum Community Conference (EthCC) in Paris on Wednesday, Yat Siu, Co-Founder of blockchain gaming and NFT firm Animoca Brands, shed light on Hong Kong’s rapid adoption of cryptocurrencies and Web3 technology, emphasizing its connection to developments unfolding in mainland China.Photo by Serey Kim on UnsplashDriven by the Chinese authoritiesSiu argued that the current crypto trend in Hong Kong signifies more than just the actions of the Chinese autonomous area itself, pointing to a larger agenda driven by China’s aspirations.According to Siu, the Chinese government’s release of its Web3 white paper in May, which positioned Web3 as the future of the internet, carries significant weight. Notably, this announcement came only days after Hong Kong revealed plans to allow retail crypto investments. Siu highlighted that even though China’s white paper did not explicitly mention cryptocurrencies, it is key to acknowledging the country’s commitment to advancing Web3 technologies.The news of Hong Kong’s crypto developments resonated throughout China, capturing attention even on China Central Television, the national TV channel. Siu underscored the broader implications of this coverage, suggesting that the developments in Hong Kong bear the imprint of higher authorities. He made it clear that any actions taken by Hong Kong would require the approval of China.Challenging US global hegemonyBeyond Hong Kong, Siu delved into the broader significance of Web3 as a tool to challenge the United States’ technological hegemony. He expressed concerns about the security risks associated with excessive reliance on tech giants such as Google, Apple, and Facebook. Siu argued that countries like Japan, Korea, and China view Web3 as an opportunity to break free from the dominance of US-centric technologies. This motivation is especially pronounced in China, which is actively pursuing de-dollarization.Reducing dependence on the US dollar represents a key factor driving the adoption of Web3 in these countries. Siu pointed out that the global currency’s position affords the United States significant power and influence, making it crucial for China and other nations to seek alternatives. Embracing Web3 technologies serves as a potential avenue for diminishing reliance on the US dollar and challenging the current financial status quo.While mainland China banned nearly all crypto activities in 2021, the country has remained one of the largest crypto-mining hubs worldwide, despite the prohibition. The proactive stance of Hong Kong in implementing crypto-friendly regulations has sparked hope that it could pave the way for China to eventually lift its long-standing ban.However, prominent figures within the Chinese establishment, such as CPIC Investment Management CEO Chenggang Zhou, have recently reiterated the country’s anti-crypto stance.The rapid adoption of cryptocurrencies and Web3 technology in Hong Kong provides a glimpse into broader developments unfolding in mainland China. Web3 is seen as a potent instrument for challenging US technological dominance, although whether that leads to China lifting its crypto ban is something that remains to be seen.

Israel Doubles Down on Blocking Crypto Funding of HamasIn a move to disrupt the flow of funds to Hamas, Israeli authorities have ordered the closure of over 100 cryptocurrency accounts on Binance, the world’s largest crypto exchange.Photo by Leonid Altman on PexelsHeightened monitoring of crypto-related financingIsraeli authorities were already monitoring crypto accounts suspected of terrorism financing before the recent attack by the Palestinian militant group Hamas. Since then, they have requested information about hundreds of accounts on Binance, suggesting that the scale of their actions has grown significantly since October 7.A statement from Israeli police last week outlined that they had frozen crypto accounts related to financing of Hamas. According to a report on Tuesday by the Financial Times (FT), the Israeli authorities have taken matters further still, having closed more than one hundred accounts on Binance.Scrutinizing 200 additional accountsSources cited by the FT as being close to the situation have revealed that these actions were initiated in response to Hamas’s assault on October 7. Authorities have also sought information on approximately 200 additional crypto accounts, with most of them being held on Binance. While Binance has acknowledged blocking a “small number” of accounts since the summer, it emphasized its adherence to internationally recognized sanctions rules and declined to provide further comment.Governments and regulators have long expressed concerns that terrorist organizations might exploit lightly regulated crypto markets for financial transactions. However, the recent attacks on Israel and the subsequent crypto-based fundraising campaigns by Hamas have made these concerns more pressing.Tom Alexandrovich, the Executive Director at the Israel National Cyber Directorate, stated that cryptocurrency has become a major tool for terror financing during these times of conflict. He noted that the amount of crypto funds involved has significantly increased since the start of the attack.Tether freezes accountsTether, the issuer of leading US dollar stablecoin USDT, announced on Monday that it had frozen 32 addresses containing more than $873,000 due to their alleged links to “terrorism and warfare” in Israel and Ukraine. The exact timing of when these accounts were blocked and the distribution of assets between Israel and Ukraine were not disclosed.Notably, US financial regulators previously alleged that money held on Binance had ties to Hamas. A lawsuit by the Commodity Futures Trading Commission (CFTC) in the United States in March claimed that senior Binance executives had knowledge of “Hamas transactions” in 2019. Binance has refuted these allegations and expressed its intent to contest the lawsuit.Commentators within the crypto space fear that opponents of the development of crypto, like US Senator Elizabeth Warren, will try to capitalize on this issue by using the opportunity to further draconian regulation.Over the past two years, Israeli authorities have seized millions of shekels from crypto accounts with suspected ties to Hamas and other militant groups in the Middle East. A recent analysis by Elliptic found that crypto wallets associated with various suspicious Middle East groups have interacted and relied on the same crypto exchange services to convert crypto into sovereign currencies.