Hong Kong Analyzes Web3 Approach of Regional Peers

At the World Trade Organization’s (WTO) 13th Ministerial Conference (MC-13) in Abu Dhabi, a consortium of major global institutions including distributed ledger project IOTA came together to ink a landmark pact aimed at enhancing digital trade, including the tokenization of real-world assets. The agreement, termed the Teaming Agreement, signifies a collective effort to propel digital trade forward, emphasizing the creation of an open, non-profit and inclusive digital infrastructure for trade data sharing. The initiative involves IOTA’s recently-formed Abu Dhabi-based IOTA Ecosystem DLT Foundation.Photo by Belinda Fewings on UnsplashCapital pledgeThe Foundation has pledged an investment of $10 million towards early-stage startups focusing on digital trade and the tokenization of real-world assets (RWAs). These investments, to be unveiled publicly over the next few weeks, will support TradeTech or trade finance technology ventures and provide assistance to startups utilizing IOTA through an accelerator program. The signatories to the Teaming Agreement include esteemed organizations such as the World Economic Forum (WEF), the Institute of Export and International Trade, the Tony Blair Institute for Global Change (TBI), the IOTA Foundation, TradeMark Africa and the Global Alliance for Trade Facilitation (GATF). This collaboration brings together a diverse range of expertise and resources, blending tech and trade proficiency to streamline supply chains and customs procedures. More efficient cross-border tradeThe primary objective of the agreement is to foster collaboration and information sharing across global supply chains, with the aim of reducing barriers and enhancing inclusivity in international trade. By leveraging digital infrastructures, the coalition aims to minimize the time and cost associated with cross-border trade, thus promoting greater participation in global commerce. The timing of this agreement is particularly pertinent, given the multitude of challenges facing global supply chains. Threats such as attacks on shipping routes and the potential rise of protectionist policies underscore the necessity for enhanced information sharing and cooperation across trade networks. Trade Logistics Information Pipeline (TLIP)At the core of this initiative lies the Trade Logistics Information Pipeline (TLIP), a public global trade infrastructure developed by TradeMark Africa in collaboration with the IOTA Foundation. Leveraging open-source technology, TLIP facilitates seamless information exchange in international trade, promoting transparency and inclusivity while empowering participants to retain control over their data. The implementation of TLIP is expected to address challenges such as document loss, information discrepancies and fraud, thereby fostering a more efficient and secure global trade ecosystem. Commenting on the development, IOTA Co-Founder Dominic Schiener stated:"By investing in the future of TradeTech, we are not just facilitating smoother trade transactions; we are laying the groundwork for a more interconnected and efficient global trade ecosystem. Our collaboration with leading organizations through the TLIP is a testament to our commitment to innovation and excellence in this field." In a separate positive development for the IOTA project on Feb. 29, Jelle Millenaar, the co-founder of Impierce Technologies and a former IOTA software engineer, outlined that his company intends to develop a digital identity wallet on top of the IOTA Identity framework. The intention is to build a wallet that is compliant with digital identity regulation within the European Union.

In response to the expanding demand for cryptocurrencies in Indonesia, the government has laid down a directive, requiring crypto exchanges operating within the Southeast Asian country to register with the recently inaugurated Commodity Future Exchange (CFX).Photo by Bisma Mahendra on UnsplashMandatory requirementThe CFX was established back in July as the world's first national bourse exclusively dedicated to digital assets. The national exchange has been modeled to replicate exchanges in traditional markets like the NASDAQ, but in this case, focusing entirely on digital assets. Under regulations introduced in 2019 by the Indonesian Commodity Futures Trading Regulatory Agency (Bappebti), crypto exchanges in the country must seek authorization. Even exchanges operating legally since 2014 fall under the category of "prospective crypto exchanges" and must undergo a rigorous process to gain recognition as legitimate entities affiliated with the CFX. Safeguarding investorsThis regulatory initiative aims to create a secure environment for crypto investors while simultaneously serving as a platform for tracking digital asset transactions for taxation purposes. Beyond the regulatory oversight, registering with the CFX also acts as a gateway for the Indonesian government to monitor cryptocurrency transactions for taxation purposes. The authorization process involves registration with self-regulatory organizations (SROs) like the CFX, followed by scrutiny by Bappebti to assess the company's suitability to operate. Only after meeting all requirements can a crypto exchange be issued a crypto exchange license (PFAK). Failure to complete the new procedures and registrations within the specified timeframe, set for Aug. 17, 2024, will result in the inability to operate in Indonesia. Currently, there are 29 prospective crypto exchanges in Indonesia that must obtain authorization to continue their operations. Regulatory oversight change in 2025It is noteworthy that a significant regulatory overhaul in 2025 will shift the oversight of cryptocurrency regulation from Bappebti to Indonesia's Financial Services Authority (OJK). This change could potentially reclassify cryptocurrencies as securities, potentially impacting taxation. While crypto assets are currently subject to Value Added Tax (VAT) and Income Tax (PPh) as commodities, reclassification as securities may lead to a reduction in taxes. In late February, Didid Noordiatmoko, head of Bappebti, announced the nation's intention to launch its state-backed crypto exchange by mid-2023. The exchange will be operated by a private-sector company rather than the government, with private-sector crypto platforms executing trades on the exchange. Crypto adoptionThe surge in demand for cryptocurrencies in Indonesia is evidenced by official data from 2023, indicating that the number of registered crypto traders exceeds that of stock traders. Data published in October outlined that Indonesia has seen a 10.1% year-on-year increase in the number of crypto investors in the country, bringing that figure to 17.79 million citizens. The increase in interest in crypto among Indonesians has not been lost on the country’s politicians as crypto appears to have become an election issue. Gibran Rakabuming Raka, a vice-presidential candidate in the upcoming Indonesian election, expressed the aim to accelerate Indonesia's position as a leader in the digital revolution by cultivating expertise in blockchain and cryptocurrencies. 

Kuwait Implements Full Ban on Crypto ActivitiesIn a significant move to combat money laundering and terrorist financing, Kuwait has taken a decisive step by announcing a complete ban on all crypto-related activities.Photo by Jan Dommerholt on Unsplash“No legal status”According to a circular issued by the Capital Markets Authority (CMA), Kuwait’s top financial regulator, earlier this week, cryptocurrencies are deemed to have “no legal status” and lack the support of any government or any asset. As a result, the prices of these digital assets are vulnerable to speculative swings, exposing investors to potential substantial losses. Consequently, the CMA asserts that engaging in crypto activities can lead to adverse consequences and financial risks for individuals and businesses alike.The ban extends beyond trading and mining. It also prohibits public companies from offering any cryptocurrency-related services. The CMA emphasized that it has never granted approval for crypto services in the past, and this outright ban reinforces the country’s commitment to curbing illicit financial activities facilitated by cryptocurrencies.Aligning with FATFThe decision comes in the wake of Kuwait’s determination to align with the Financial Action Task Force’s (FATF) global requirements for handling crypto assets. The country is attempting to demonstrate its compliance with international anti-money laundering guidelines by clamping down on digital assets.Kuwait’s approach towards cryptocurrencies diverges significantly from other Gulf states that have embraced the nascent industry with more openness. The likes of the United Arab Emirates (UAE), Saudi Arabia, and Bahrain have previously engaged with crypto assets in various ways.For example, Bahrain granted approval to global crypto exchange platform Binance to provide digital asset services within the country. It’s keen to embrace digital assets as it pivots away from an oil-based economy. The Kingdom recently welcomed plans by Singapore-based private equity firm Whampoa Group to establish a crypto-friendly digital bank there.Meanwhile, Saudi Arabia’s sovereign wealth fund has also invested in several US-based venture capital funds which are focused on crypto and blockchain technologies.Dubai, in particular, has been actively working on establishing a regulatory framework for digital assets, aiming to position itself as a digital hub in the region. The UAE as a whole has recognized crypto assets as securities for several years, fostering a favorable environment for crypto businesses.CriticismNews of the ban also provoked criticism, including commentary from Alex Gladstein, Chief Strategy Officer with the Human Rights Foundation. Gladstein, taking to Twitter, stated: “ Not surprising. I expect all authoritarian regimes (especially gulf tyrannies like the UAE and Saudi Arabia) to follow in Kuwait’s footsteps and eventually pass severe restrictions on citizen use of Bitcoin.” While the UAE trends in the opposite direction, Gladstein is not optimistic about the free use of decentralized cryptocurrencies in the UAE over the longer term.As the global crypto landscape continues to evolve, each country in the Gulf region is adopting unique approaches to address the opportunities and challenges posed by digital assets. While there may be opposition to the technology, decentralized digital assets will benefit from jurisdictional arbitrage in efforts to get this innovation rolled out for the benefit of ordinary people around the world.