Experts Gather at KBW 2023 to Explore the Future of Blockchain and Web3

Hong Kong Insurer Expands Into Digital AssetsOneDegree, a leading virtual insurer in Hong Kong, has successfully raised US$55 million in its latest funding round to support the expansion of its digital assets insurance portfolio, according to an announcement made by the company on Thursday.The round saw participation from existing investors such as Gobi Partners, Sun Hung Kai, and Bitrock, as well as new investors. This marks OneDegree’s fifth fundraising effort since its establishment in 2016 and brings its total funds raised to over US$97 million. $28 million of this Series B round had been raised in 2021.Digital asset insurance will be offered under the name “OneInfinity” by the firm in partnership with global insurance behemoth Munich Re. The product is being targeted at digital asset trading platforms, custodians, asset managers, and technology providers. While the company doesn’t insure DeFi projects right now, it aspires to do so in the future.Photo by Kindel Media on PexelsLeading Hong Kong online insurerAs one of the four purely online insurers licensed by the Hong Kong Insurance Authority, OneDegree is at the forefront of the authority’s push to integrate technology into the insurance sector to enhance services and reduce costs. The company is not permitted to hire agents, and all sales must be conducted online or through mobile apps.Alvin Kwock Yin-lun, Co-Founder of OneDegree and former JPMorgan banker, expressed his gratitude for the strong support received during this challenging fundraising environment. Kwock attributed the successful round to the company’s robust revenue growth in various insurance segments, including pet, home, fire, medical, and digital assets coverage. He expects OneDegree to achieve profitability next year.Digital asset insurance importanceHighlighting the importance of digital asset insurance, Kwock pointed out that in 2022, approximately US$3.8 billion worth of digital assets were compromised globally, out of a total global cryptocurrency market capitalization of US$1 trillion. He estimated that the market for digital asset insurance premiums would surpass US$1 billion annually in the coming years.To capitalize on this growing demand, OneDegree has been focusing on providing insurance coverage to virtual asset trading platforms and operators. The company introduced its cryptocurrency insurance by offering a HK$100 million cover to Hong Kong Digital Asset Exchange in November 2021.Kwock emphasized that the recent regulatory regime introduced by the Securities and Futures Commission (SFC) on June 1 will further drive the demand for digital asset insurance. He believes OneDegree is well-positioned to offer comprehensive coverage for the risks faced by digital asset operators, as the company possesses the necessary expertise and experience.Looking ahead, OneDegree plans to expand its presence across Asia and offer innovative products such as InsurTech and cybersecurity software-as-a-service solutions.OneDegree’s expanding presence in Asian markets relative to digital assets is to be welcomed. The digital assets space has had its fair share of collapses that may have been prevented with the involvement of a digital asset insurance specialist, and failing that, the application of such a product would naturally prevent losses suffered by market participants.

Thailand’s KBank Furthers Crypto Business Through Satang AcquisitionKasikornbank (KBank), Thailand’s second largest bank, is expanding its involvement in the digital assets sector through the acquisition of a majority stake in the local crypto exchange Satang.Photo by Lisheng Chang on UnsplashTradFi embracing cryptoThe acquisition, involving a purchase of 97% of Satang’s shares, is a significant move in the context of an ongoing trend of traditional financial institutions embracing digital assets. The deal was officially announced on Monday, as disclosed on KBank’s official website.KBank executed the acquisition through its newly established subsidiary, Unita Capital, whose registered capital is valued at 3.7 billion Thai baht (approximately $103 million). Unita Capital specializes in investments within the digital asset sector. This move underlines the bank’s commitment to stay ahead in the dynamic world of digital finance.Subsidiary formationIn light of the acquisition, Satang Corporation is set to undergo a name change and will soon be known as Orbix Trade Company Limited. Unita Capital has established a number of other subsidiary companies as a consequence of the buy-out.KBank’s cryptocurrency venture will be structured into three distinct divisions. Orbix Custodian has been formed, focusing on secure digital asset storage and management. There is a growing demand for reliable digital asset custody services. KBank will use Orbix Custodian as a vehicle to capitalize on that growth opportunity.Orbix Invest has been established to act as the venture arm of the business relative to the digital assets space. It will focus on fund management in meeting the needs of clients looking for exposure to the digital assets sector. Lastly, Orbix Technology has been established to concentrate on blockchain technology development.Satang, a prominent player in the Thai cryptocurrency scene, operates a cryptocurrency exchange alongside a range of digital asset services. Notably, Poramin Insom, the founder of Satang, is recognized for his role in launching Firo (formerly Zcoin), a privacy-centric cryptocurrency. Insom confirmed the acquisition via a Facebook post on Monday, acknowledging the evolution of Satang as it transitions under KBank’s ownership.Insom stated: “I’ve been at Satang since 2017 until now, six years have passed. Currently, Satang on the trading board has already exited according to the news. And there should be an official announcement soon.” He also highlighted Satang’s diversified ventures, including Satang Technology, a blockchain service platform, and Satang Space, focusing on space-related endeavors.This strategic move by KBank follows its recent launch of a $100 million fund, introduced in September, targeting investments in Web3, fintech, and artificial intelligence (AI). In 2022, KBank launched Bigfin, a digital asset investment analysis platform. Bigfin has since been integrated with the Binance platform.Last year the bank backed Thai digital asset and blockchain startup Forward, a project that is working on developing a decentralized derivative platform.KBank is recognized as the second largest lender in Thailand based on assets, trailing behind Bangkok Bank. Thai NVDR Company Limited is the largest shareholder of KBank, as per data from the Stock Exchange of Thailand (SET), with the SET itself owning 99.9% of NVDR’s shares.

NFTs not subject to South Korea’s Virtual Asset User Protection ActIn anticipation of the Virtual Asset User Protection Act coming into effect in July of next year, the South Korean Financial Services Commission (FSC) has issued an advance notice regarding its subordinate statutes.Photo by Ethan Brooke on UnsplashSeven specific provisionsThe subsidiary regulations under the Act detail seven specific provisions aligned with the Act’s objectives. Firstly, assets categorized as electronic securities, mobile vouchers, deposit tokens backed by the Bank of Korea’s central bank digital currencies (CBDCs) and non-fungible tokens (NFTs) will not be classified as virtual assets and hence, not regulated by this Act. However, in instances where NFTs are used as a means of payment for specific goods or services, they will be regarded as virtual assets.Secondly, banks will take responsibility for managing the deposits of users on cryptocurrency exchanges. This aligns with the Act’s requirement for virtual asset service providers (VASPs) to keep users’ funds separate from their own, either by depositing them in, or entrusting them to, reputable institutions. Under these regulations, banks are required to manage users’ assets in a manner consistent with how investors’ deposits are handled under the Capital Markets Act. This means that banks are allowed to invest VASP users’ assets only in secure instruments, such as state and local government bonds, and are also obligated to pay fees to deposit owners, taking into account the yields of these investments.80% of user assets in cold walletsThe third key aspect of the regulations is that VASPs are required to store a minimum of 80% of user assets in cold wallets, which are not connected to the internet. This is higher than the current requirement of 70%, enhancing the security measures for users of virtual assets. To calculate the total value of a virtual asset at any given time, its total supply is multiplied by its average daily price over the past year. VASPs are obligated to assess the value of virtual assets every month.The fourth regulation mandates that VASPs must enroll in an insurance plan, contribute to a rainy day fund or accumulate reserves. This is to ensure they can fulfill their compensation responsibilities in the event of incidents like security breaches or technical failures. The required preparation amount is set at a minimum of 5% of the user assets stored in hot wallets, as these are more susceptible to risks. VASPs are required to update their compensation thresholds or reserves monthly and must take any necessary actions to comply with these requirements by the next working day following the update.Information disclosure guidelinesAnother regulation addresses the issue of insider trading in the context of the virtual asset market. Under the current Capital Markets Act, information is considered disclosed when it’s made available through disclosure systems of the FSC or the Korea Exchange (KRX). However, since the cryptocurrency market lacks a similar system, the new statute provides criteria for determining when information is deemed disclosed.For instance, if a VASP, including exchanges, releases crucial information about a virtual asset on an exchange and six hours pass, that information is regarded as disclosed. This acknowledges the non-stop nature of the crypto market. Moreover, information disclosed post 6 p.m. is treated as officially disclosed after 9 a.m. the next day.Additionally, if a virtual asset issuer publishes significant information about its token on a website hosting its white paper, the information is deemed public after one day. This is conditional upon the website being publicly accessible and having consistently provided important token information for the preceding six months.These rules aim to provide clarity and fairness in information disclosure in the crypto market, adapting the principles of traditional financial markets to the unique dynamics of virtual assets.No arbitrary suspension of transactionsThe sixth regulation restricts VASPs from arbitrarily halting deposits and withdrawals of virtual assets unless there are justifiable reasons for such actions. Acceptable circumstances for suspending these transactions include situations where the VASP experiences a technical disruption in its system, where regulatory authorities instruct a VASP to cease deposits and withdrawals or where cyberattacks or similar incidents have occurred or are clearly imminent.Lastly, virtual asset exchanges are required to monitor for abnormal transactions continuously. These are transactions that show substantial shifts in the prices or trading volumes of virtual assets, particularly in response to news or rumors that could influence cryptocurrency prices. If VASPs suspect unfair trading practices, they must report to the FSC or the Financial Supervisory Service (FSS). When there is ample evidence of such activities, crypto exchanges are obligated to notify the police or the prosecutors’ office. In addition, the financial regulator has the authority to levy fines based on the prosecution’s decisions or after completing consultations with the prosecution if a year has passed since the day of the report.During the period of advance notice, which spans from Nov. 11 to Jan. 22, the FSC will seek comments from relevant organizations, experts and businesses. This process is aimed at refining the rules and regulations subordinate to the Virtual Asset User Protection Act. Moving forward, the financial authorities plan to publish a set of guidelines and Q&A materials and conduct explanatory sessions, with the goal of ensuring a smooth implementation of the Act.