Hong Kong Says No to Light Touch Regulation

Animoca Brands Expands Focus to Non-US MarketsHong Kong-based Web3 and blockchain unicorn, Animoca Brands, is shifting its attention to markets outside the United States following the Securities and Exchange Commission’s (SEC) classification of its $SAND token as an unregistered security.This move comes after the SEC named $SAND, along with other tokens like Solana and Polygon, in lawsuits against major exchanges Binance and Coinbase Global. The labeling of these tokens as securities by the SEC poses legal risks for companies involved in their sale.Photo by Zulian Firmansyah on UnsplashNavigating regulatory challengesAnimoca Brands, led by Co-Founder and Chairman Yat Siu, has long embraced a global approach rather than focusing solely on one territory. Siu clarified the firm’s response to the latest regulatory development to the South China Morning Post (SCMP) via email on Thursday.He emphasized that while the SEC concentrates on the US, Animoca Brands operates in more progressive jurisdictions such as Hong Kong and Japan, where $SAND is widely available and accepted. In response to the recent blockchain-hostile climate in the US, the company has proactively started emphasizing other markets, reducing its reliance on the US market and mitigating potential risks associated with regulatory actions.Exchange business impactWhile Coinbase CEO Brian Armstrong has declared that his company has no intentions of delisting tokens labeled as securities by the SEC, this decision poses challenges for other exchanges less committed to selling these tokens. Dan Gallagher, Chief Legal Compliance and Corporate Affairs Officer of Robinhood Markets, expressed concerns about listing tokens due to regulatory rules and the uncertainty surrounding tokens created by organizations outside the US.These developments could have a chilling effect on exchanges, prompting crypto firms to consider moving away from the US market due to perceived uncertainty and the associated legal risks. As a demonstration of that, in a bankruptcy court hearing on Thursday, it emerged that the FTX Debtor is talking with bidders with a view to restarting the international business but restarting the US-based business is less certain.Animoca’s Middle East ventureIn a further display of its commitment to expanding outside the US, Animoca Brands announced plans in March to make significant investments, worth tens of millions of dollars, in the Middle East. This move reflects the company’s proactive strategy to tap into non-US markets and leverage the growth potential offered by progressive jurisdictions.Animoca Brands’ decision to prioritize non-US markets and reduce its reliance on the US market aligns with its global operating approach. The SEC’s classification of $SAND as a security has prompted the company to shift its attention to more progressive jurisdictions where $SAND remains widely accessible.As other firms, including Ripple, also explore growth opportunities outside the US, the global landscape of the crypto industry is evolving. By navigating regulatory challenges and expanding into promising markets, Animoca Brands aims to position itself for continued success and mitigate potential risks associated with the SEC’s actions in the US market.

Conut teams up with Foblgate to provide trendy crypto news to exchange usersSouth Korean cryptocurrency exchange Foblgate announced on Tuesday (local time) that it will collaborate with Korean cryptocurrency newsletter Conut to bring relevant news about virtual assets to a wider audience, providing readers with richer and more informative content.Photo by Markus Winkler on UnsplashPublishing entertaining and insightful crypto newsLaunched in 2021, Conut is dedicated to providing crypto news in a way that is fun, straightforward and appealing to younger demographics, considering that crypto is more popular among younger age groups. It simplifies complicated topics like Play-to-Earn (P2E) games, the metaverse, cryptocurrency regulations and spot bitcoin exchange-traded funds (ETFs) using trendy memes and internet vernacular instead of formal language. Currently, the newsletters are available on the official Conut website or via email subscription, which has accumulated over 8,000 subscribers as of this month. In the future, Conut plans to launch a mailing service as well as a P2E app called Coquiz to increase accessibility and reach more people who are interested in crypto and blockchain.Through this newest collaboration with Foblgate, content from Conut’s recent newsletters will be featured on Foblgate’s main page, providing users with access to a wealth of information on a wide range of topics, from crypto basics to the latest trends.“By making Conut’s content easily accessible to our users, we intend to promote a better general understanding of blockchain and resolve information asymmetry. We plan to explore and offer more content in the future for our users to take advantage of,” said Foblgate CEO Ahn Hyun-jun.The founders of Conut, Lee Choong and Jo Hana, also expressed their anticipation for the collaboration, stating that it would be a great help in disseminating quality content.Nurturing creativityFoblgate has been an active proponent of content production and promotion. Earlier this year, the exchange co-hosted the Self-Made Genius Contest — a contest for exploring creative projects in traditional and digital art.

BitMEX CEO Calls for an End to Internal Market MakersIn a recent interview, Stephan Lutz, the acting CEO and group CFO of 100x Group, the parent company of Seychelles-headquartered global crypto exchange BitMEX, expressed his belief that crypto exchanges should phase out their internal market-making teams.Photo by Joe Roberts on UnsplashProp trading desks unnecessarySpeaking with The Block, Lutz argued that with the growth of institutional liquidity providers and high-frequency traders (HFTs) in the market, proprietary trading desks are becoming unnecessary.Lutz stated: “You have enough HFTs out there and prop shops that can perform that function.” He was referring to the role of liquidity providers in filling gaps in the market. He made these comments in response to the emergence of information earlier this week that raised questions about internal trading practices at Crypto.com, a Singapore-based exchange.BitMEX, once the world’s largest crypto derivatives exchange, also used to employ internal traders who acted as market makers. However, Lutz explained that BitMEX’s internal trading team, named Arrakis Capital, now functions primarily as a “treasury desk.” He sees this transition as a natural evolution for crypto exchanges in a market that has matured and attracted more institutional liquidity providers.Arrakis Capital currently performs limited functions, including converting commission fees earned in Bitcoin into fiat currency for operational purposes, hedging BitMEX’s exposure to tokens held as inventory, and making markets for BitMEX’s token $BMEX. Lutz clarified that Arrakis’s market-making activities are limited because external market makers find the token’s liquidity insufficient.Regarding profitability, Lutz stated that Arrakis earns “very minor returns” of up to $100,000 per month from holding T-Bills, but it incurred losses last year. He noted that Arrakis used to play a more significant market-making role when BitMEX dominated the crypto futures market. However, he assured that the trading desk was always segregated, despite accusations in the past.Fee structuresLutz acknowledged that exchanges with internal trading teams have faced increased scrutiny since the controversies surrounding Alameda Research and FTX. To differentiate between benign internal trading teams and hedge fund-like operations, Lutz highlighted several factors, including the separation of client funds and house funds, access to sensitive data, and the ability to move markets on their own exchange. Fee structures also play a role, with low or no transaction fees potentially signaling a market-making motive rather than serving as a counterparty.Lutz’s perspective suggests that crypto exchanges should rely on external liquidity providers and HFTs rather than maintaining internal market-making teams. He argues that the market has evolved. At this point he feels that these teams are no longer necessary, due to the presence of established players within the digital assets space.As regulatory scrutiny grows, ensuring transparency and avoiding conflicts of interest become crucial for maintaining trust within the crypto exchange ecosystem. The digital assets industry is far from arriving at a mature stage in its development. While many in the industry have found the stance taken by regulators to be unhelpful, the industry itself must also demonstrate its ability to iteratively move towards best practice, without that being a knee-jerk response to regulatory enforcement.