KISA and Ministry of Science and ICT Launch Blockchain Program for Innovation

While the Web3 sector seemed to be hamstrung by litigation and regulatory scrutiny in 2023 following multiple platform failures, it's going out with a bang in China with news of a $10 billion fund in Shenzhen to support Web3 startups.Photo by 李大毛 没有猫 on UnsplashFueling Web3 startup growthGBA Capital, a Chinese venture capital (VC) firm, made a significant announcement during the Guangdong-Hong Kong-Macao Greater Bay Area Digital Economy Development Conference on Tuesday. The firm, backed by China's state-owned National Engineering Laboratory, unveiled plans to launch a substantial $10 billion Web3 fund. The conference also served as an educational platform, enlightening investors and attendees unfamiliar with the intricacies of the Web3 industry. Luo Jinhai, founder of Huoxun Finance and creator of the "Yuan Asset" concept, elucidated on the unique attributes of specific forms of digital assets, including independence, privacy, security, scarcity and liquidity. Metaverse focusThis initiative aims to fuel the growth of startups specializing in virtual reality, the metaverse and non-fungible tokens (NFTs), ultimately transforming the Guangdong-Hong Kong-Macao economic region into the global "meta-asset capital."  Meta-assets are virtual objects that serve as key components within the make-up of the metaverse. Haolong Li, the chairman of GBA Capital, outlined the ambitious vision, stating that the conference would facilitate "meta-asset global tours" in key international hubs such as Japan, Singapore, Dubai, Silicon Valley and Europe. The objective is to enhance the visibility of meta-assets and position the economic area as a leading force in the emerging Web3 landscape. Previous developments that have played out over the course of 2023 suggest that China is placing a particular focus on embracing metaverse technology, with a view towards integrating the metaverse with existing systems in the country.   The Ministry of Industry and Information Technology of China, in response to a proposal about promoting the development of the Web3 industry, emphasized ongoing research in areas such as the Metaverse, NFTs and decentralized identity management. In September the Ministry set out an action plan for the cultivation of a domestic metaverse. As part of that plan, it aspires to nurture three to five metaverse companies of global significance. GBA Capital, established by China Europe International Financial Group in Hong Kong, boasts strategic partnerships with key financial institutions, including the Asia Pacific Investment Bank and China's state-owned National Engineering Laboratory. The firm's focus on investment and incubation in the digital economy aligns with its goal of integrating industrial clusters, capital resources, corporate resources and policy advantages to offer comprehensive support and services to enterprises. In a related development, GBA Capital's subsidiary Zhongrong Global successfully raised an angel funding round at a valuation of 100 million Chinese yuan ($14 million) back in May. The funds will be allocated to Web3 project incubation and industrial services in the artificial intelligence sector. The Guangdong-Hong Kong-Macao Bay Area has experienced a surge in Web3 startups and overseas corporate relocations since the beginning of the year, setting the stage for GBA Capital's substantial Web3 accelerator fund.

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.”

India is strategically navigating the development of its digital rupee, with the Reserve Bank (RBI) actively addressing privacy concerns through technological solutions in its central bank digital currency (CBDC) pilot programs. According to a recent report by CoinDesk, a senior official with insights into these initiatives revealed that while progress is evident, the RBI is proactively exploring ways to ensure privacy in the use of the digital rupee.Photo by Julian Yu on UnsplashPursuing mechanisms to maintain anonymityThe RBI has introduced a new dimension to the discourse on privacy concerns associated with CBDC usage. The central bank official suggested that the RBI may seek legal backing from India’s finance ministry to enact legislation allowing customers to delete transactions for the purpose of maintaining anonymity. New-found urgencyPublic statements from the RBI suggested a lack of urgency in implementing a full-scale retail CBDC, coupled with a reluctance to provide a specific timeline. However, recent events indicate that an underlying sense of urgency may be emerging. In the past month, the retail CBDC achieved a notable milestone, processing one million transactions in a single day, with support from various banks. Several banks, including HDFC Bank, Kotak Mahindra Bank, Axis Bank, Canara Bank, IDFC First Bank and Union Bank of India, reportedly encouraged their employees to deposit funds in CBDC instead of fiat currency, contributing to this achievement. The official overseeing the CBDC development emphasized the necessity for experimentation and substantial efforts to ensure the security of the digital currency. While the settlement aspect is considered straightforward, addressing latency remains a priority for the RBI. No mandate on taxThe RBI, historically known for its opposition to crypto both domestically and globally, clarified that crypto taxation is not within its mandate. This clarification suggests that the RBI might not object if the Indian government decides to reduce the stringent taxes currently imposed on cryptocurrencies. The central bank clarified that it lacks the mandate to express a viewpoint on reducing a contentious tax that has stirred debate within the crypto industry. The RBI has been a driving force behind the adoption of wholesale and retail CBDC since late 2022 when it initiated pilot programs. The official emphasized that taxation matters fall under the government’s purview, reinforcing the RBI’s focus on its designated responsibilities. Similarly, the country’s judiciary recently turned down a plea to have it formulate a crypto regulatory framework, outlining that this too is up to the government to address. The central bank has a historical context of attempting to ban cryptocurrencies, with effective prohibitions in place between 2018 and 2020 until a Supreme Court order overturned the ban. Since then, the RBI has consistently expressed concerns about cryptocurrencies in various forums, including the Group of 20, where India played a leading role in coordinating global regulation in the crypto space. Recent utterances from the RBI governor, Shaktikanta Das, suggest that the regulator is disinterested in seeing the offering of spot crypto exchange-traded funds (ETFs) in India despite that eventuality coming to pass last month in the United States. Das also spoke positively recently about the tokenization of real-world assets using blockchain technology.