Busan City Aims to Cultivate Growth in Blockchain and Fintech Industries

Korean Financial Authorities to Provide Support for Security Token MarketAmid growing calls for accelerating the growth of the emerging security token (ST) market, the South Korean government is preparing to introduce supportive measures. The security token market is powered by blockchain technology which allows fractional investment in real world assets (RWAs) such as real estate and artwork.Security tokens are digital assets that represent securities generated through a process called security token offering (STO). These tokens, backed by RWAs, can be traded similarly to traditional securities. Investors can use these tokens to obtain shares, voting rights, interest, or profits.Photo by Philip Jang on UnsplashSupport measures for security token IndustryNext month, the Financial Services Commission (FSC) will draw up support measures and policy improvement plans to bolster the nascent security token industry. An FSC representative mentioned that the agency intends to work with the National Assembly to finalize the legislation of security token-related bills by November. Furthermore, the government official said the FSC will actively seek input from industry stakeholders to formulate strategies for enhancing policies designed to promote the growth of the security token market.To align with the national objective titled “The Establishment of Digital Asset Infrastructure and Regulatory Framework,” the FSC revealed regulatory guidelines for security token issuance and distribution in February. These new guidelines are centered around the establishment of institutions responsible for account management and entities engaged in over-the-counter (OTC) trading. Subsequently, in July, lawmaker Yun Chang-hyun, a member of the National Assembly’s National Policy Committee, proposed a bill to amend the Electronic Securities Act and the Capital Markets Act with the aim of ensuring that these Acts are consistent with the new regulatory guidelines.Security token market’s growth potentialWith growing anticipation that the security token market could rival the size of the exchange-traded fund (ETF) stock market, securities firms, banks, and blockchain companies have been eager to carve out a niche for themselves since the start of the year. However, their progress has been hindered by a potentially extended period of higher interest rates in the US and the slow advancement of security token-related legislation. While these organizations tried to explore opportunities through the financial regulatory sandbox, their endeavors proved more or less fruitless. An official from a securities firm voiced concerns over the escalating costs of setting up security token infrastructure, especially with legislative delays.On this matter, the Korea Financial Investment Association (KOFIA) has emphasized the urgent need to pass security token legislation to clear up regulatory ambiguities. They’ve also called for measures to stimulate market growth, such as relaxing regulations related to token issuance and distribution and increasing investment caps.At a seminar hosted by the Korea Capital Market Institute, Ahn Hyuk, Head of the Platform Division at Korea Investment and Securities, highlighted that the rigorous review of security registration applications by the Financial Supervisory Service (FSS) might impede the security token market’s growth. Responding to this, Jang Young-shim, Head of the Corporate Disclosure Department at FSS, said that both the FSC and FSS will carefully listen to industry feedback, addressing a range of topics from regulatory relaxation to investor protection.

Hong Kong Urged to Issue HKD StablecoinA new policy proposal is urging the Hong Kong government to take a bold step by issuing its own stablecoin, HKDG, pegged to the Hong Kong dollar. The aim is to compete with established stablecoins like USDT and USDC, according to a paper co-authored by notable experts in the field.The proposal, co-authored by Wang Yang, Vice Chancellor of the Hong Kong University of Science and Technology and Chief Scientific Advisor of the Hong Kong Web3 Association, angel investor Cai Wensheng, BlockCity founder Lei Zhibin, and Ph.D. student Wen Yizhou, stresses the significance of stablecoins as a link between traditional finance and the digital economy.Photo by Chapman Chow on UnsplashHKD stablecoin benefitsThe authors believe that a Hong Kong Dollar-pegged stablecoin can enhance financial inclusiveness, improve transaction efficiency, reduce costs, strengthen payment systems, and boost Hong Kong’s fintech capabilities.The experts argue that the current plan of allowing private institutions to issue stablecoins is not ambitious enough and may result in limited market share. They draw a comparison with Singapore’s XSGD stablecoin, issued by Xfers, which only has a market cap of $65 million, compared to the combined market capitalization of over $110 billion for USDT and USDC. With Hong Kong’s foreign exchange reserves surpassing $430 billion as of March, an HKDG stablecoin backed by the government would offer higher credibility and lower risk.Private vs. public issuanceWhile the proposal acknowledges potential risks, such as legal and regulatory challenges, technical risks, and short-term exchange rate fluctuations, it argues that government-issued HKDG would bear lower risks compared to stablecoins issued by private institutions. The authors assert that HKDG would benefit from government regulation and the transparency provided by blockchain technology.Furthermore, the paper suggests that HKDG could aid in Hong Kong’s de-dollarization efforts and challenge the dominance of the US Dollar in the crypto ecosystem. It is believed that HKDG could provide additional liquidity for government investment projects, facilitate the digitization of traditional assets, foster financial innovation and competitiveness, and increase transparency.Recent months have seen Hong Kong demonstrate its intention to establish itself as a global hub for the crypto industry. To support this, a Web3 task force has been set up to cultivate a thriving ecosystem in the region.There has been plenty of activity of late relative to stablecoin development in Asia. At the end of May, Hong Kong-based qualified custodian and trust company First Digital Trust, announced plans to introduce a US dollar stablecoin, issued and regulated in Hong Kong. Last month it emerged that Japan’s largest bank, Mitsubishi UFJ Financial Group, Inc. (MUFG), is in discussions regarding the issuance of stablecoins on its blockchain network.Competing internationallyIssuing a government-backed stablecoin could be a transformative move for Hong Kong’s fintech landscape. By leveraging its substantial foreign exchange reserves and embracing blockchain technology, Hong Kong could create a stablecoin that not only competes with established players but also promotes financial inclusiveness and strengthens its position as a fintech leader.With the potential benefits appearing to outweigh the identified risks, it still remains to be seen whether the Hong Kong government will adopt this proposal and pave the way for an HKDG stablecoin in the near future.

Strategic Shift Sees Wintermute Expand Singapore BaseCrypto market maker Wintermute is making a strategic shift towards Asia, specifically in Singapore, following the digital asset industry’s growing interest in the region’s growth opportunities.Photo by Hu Chen on Unsplash4% of staff moving to SingaporeIn an interview with Bloomberg last week, Wintermute Co-Founder Yoann Turpin said he will move from London, where the company is currently headquartered, to Singapore in the coming months. Additionally, approximately 4% of the company’s workforce, which currently comprises around 85 staff members, will also relocate to the city-state, where Wintermute conducts its derivatives business.At the time of publication, the company was also actively recruiting for an open position in the city-state. In further publicizing Wintermute’s developing presence in Singapore, Turpin took to social media recently to invite people to meet Wintermute’s Singapore-based team in September at Token 2049 Singapore. Evgeny Gaevoy, Wintermute Co-Founder and CEO, is scheduled to appear as a speaker at the event.Turpin emphasized the company’s focus on Asia and highlighted the significance of having a co-founder based in the region to drive the business forward. The move comes as the crypto industry faces the aftermath of a crackdown in the United States, triggered by bankruptcies at platforms like FTX and Celsius Network.Exploring global opportunitiesIn response, crypto businesses are exploring opportunities in Asian markets, with countries like Singapore, Hong Kong, Japan, and the United Arab Emirates vying to attract companies while ensuring robust regulatory frameworks in the wake of the market turbulence in 2022.Although tokens like Bitcoin and Ether have partially recovered from the crash experienced last year, spot digital-asset trading volumes and volatility have remained low, indicating reduced investor engagement. That said, demand for crypto futures and options has proven to be more resilient.Possible Dubai expansionWintermute established an office in Singapore in 2021, adding to its existing base in London. Turpin also confirmed to Bloomberg that the company is weighing up the possibility of establishing a third office in Dubai as part of its expansion plans. Dubai, like Singapore and Hong Kong, has been actively trying to attract crypto businesses over the course of the past twelve months.During the 2021 crypto bull market, the company reported trading volume worth $1.5 trillion and generated $1.05 billion in revenue. However, the market maker also faced challenges during the market turmoil, including exposure to around $55 million of assets on FTX. Moreover, in September of the same year, Wintermute experienced a hack that resulted in a loss of about $160 million from its decentralized finance operations.Despite the hurdles faced in 2022, Turpin expressed confidence in the company’s resilience and stated that they do not have immediate plans to raise funds. The company just celebrated six years in business, and has executed 8.4 million OTC trades over the course of the past twelve months.By relocating key personnel and expanding its presence in Singapore and possibly Dubai, the company aims to strengthen its foothold in the Asian market and navigate the challenges and opportunities that lie ahead.