Hong Kong Setting High Bar on Crypto Rules

Galaxia Moneytree partners with Charzin to integrate security tokens into EV charging systemsKorean financial platform services provider Galaxia Moneytree announced on Tuesday (local time) that it has signed a memorandum of understanding (MOU) with Charzin, a company that specializes in developing infrastructure for charging electric vehicles (EVs), to design a security token offering (STO) platform that issues security tokens for optimizing the process of EV charging. This includes securing installation sites and facilities for EV charging stations.Photo by Andrew Roberts on UnsplashMerging blockchain and transportationHeadquartered in Daegu, Charzin is notable for its app EVZ, which uses a blockchain-based sharing module to connect EV drivers and EV charger owners for faster charging and optimized revenue acquisition.Galaxia Moneytree will be responsible for establishing and operating the STO platform, while Charzin will handle business development, support for the launch of security token products and construction of EV charging facilities.The signing ceremony for the MOU took place at Galaxia Moneytree’s headquarters in Seoul on Monday with Galaxia Moneytree CEO Shin Dong-hoon and Charzin CEO Choi Young-seok in attendance. The two companies also discussed plans to launch other products that combine finance and EV charging infrastructure.“In addition to our ongoing efforts, we plan to design STO products for various underlying assets, such as renewable energy and aviation assets,” Galaxia Moneytree said. The company recently formed an aviation asset tokenization consortium in September.Ongoing partnershipsMeanwhile, Charzin recently announced its partnership with Hi Investment and Securities to venture into the security token business. The firms plan to raise funds for developing EV charging infrastructure by issuing security tokens and subsequently share the profits from running such projects.

Korean Lawmakers Complete First Rough Draft of Virtual Asset User Protection BillKorean lawmakers have completed the first rough draft of the virtual asset user protection bill at a National Policy Committee meeting held later last month.©Pexels/Matthias ZomerAgreeing on term usage ‘virtual assets’So far, 18 bills have been proposed to regulate cryptocurrencies, and the lawmakers and the Financial Services Commission (FSC) agreed to use the term “virtual assets” to encompass similar terms such as digital assets and crypto assets.Phased enactment of billsThe bills are likely to be reviewed under the title “Virtual Asset User Protection Act.” The bipartisan group agreed to enact the bills in phases, introducing the user protection bill in the first phase and the virtual asset listing and issuance bill in the second phase.Meanwhile, there were mixed opinions on the content of the bills. In particular, there was debate over whether the bills should stipulate that the central bank digital currency (CBDC) is excluded from virtual assets, and whether the bills should include a standard for determining if a virtual asset is a security.Debate over stipulating CBDC’s statusThe stipulation of excluding CBDC from virtual assets was the most divisive topic since it would lead to defining the conditions for other assets such as non-fungible tokens. Moreover, the Act on Reporting and Using Specified Financial Transaction Information, which currently regulates virtual asset service providers (VASPs), does not contain any stipulation on CBDC. Some raised concerns that such discrepancies could later cause confusion. In the end, assembly members decided to discuss the matter again in April after consulting with the Bank of Korea and the Ministry of Government Legislation.Criteria for classifying virtual assets as securitiesRegarding whether to include criteria for classifying virtual assets as securities, the lawmakers and financial regulators took different sides.Lee Yong-woo, a member of the Democratic Party of Korea, underlined that a clear statement of the relationship between the issuer and the recipient of virtual assets in a whitepaper can determine their security status. He added that such provisions should be included in the bills.Park Min-woo, an FSC official, on the other hand, commented on a cautious note that in case virtual assets fall under the category of securities, they may not be applicable to the virtual asset act. He explained that VASPs might deal with both securities and virtual assets, and in such cases, there could be a misunderstanding that VASPs are not subject to the virtual asset act simply because they trade securities.

As the cryptocurrency market anticipates the approval of a spot bitcoin exchange-traded fund (ETF) in the United States and the subsequent boost to bitcoin’s unit price, Arthur Hayes, Chief Investment Officer (CIO) of family office Maelstrom, has issued a warning of potential market turbulence. Hayes, better known as the founder of crypto derivatives platform BitMEX, has moved on to Hong Kong-based Maelstrom, a family office that invests in early stage infrastructure ventures that implicate a move towards the decentralization of everything.Photo by Kanchanara on UnsplashMacroeconomic risk factorsIn a detailed blog post on Friday, Hayes outlines a number of macroeconomic variables that could lead to a bitcoin unit price downturn. Hayes begins by highlighting the depletion of the Federal Reserve’s reverse repo program (RRP), which has served as a significant driver for risky assets over the past year. This program allows qualified banks and investment firms to park cash and earn interest on it. The RRP balance has rapidly declined from a record high of $2.5 trillion at the end of 2022 to $700 billion. Hayes projects it to reach its historical average of $200 billion by March. As this liquidity source dwindles, he anticipates negative impacts on bonds and stocks, as well as cryptocurrencies. Fed BTFP expirationThe second factor contributing to the potential market turmoil is the expiration of the Bank Term Funding Program (BTFP) on March 12. This crucial Fed facility is designed to provide longer-term loans to commercial banks. The mechanism aids banking sector stability. Hayes is concerned that the BTFP might not be extended. Such an eventuality could lead to bankruptcy for banks holding massive unrealized losses on their bond holdings. It could lead to a “liquidity rug pull” event reminiscent of the banking crisis in March of the previous year. The crypto OG predicts that such an eventuality would force a response. “The combination of a lack of liquidity gushing from the RRP and the lack of printed money to cover the bond losses on banks’ balance sheets will decimate the financial markets globally,” he wrote. Hayes asserts that the combination of reduced liquidity from the RRP and the lack of printed money to cover bond losses could have a global impact on financial markets. In response to this scenario, he predicts that the Fed will cut interest rates during its March 20 meeting and reinstate the BTFP funding line. ‘Healthy’ correctionIn terms of bitcoin’s price, Hayes foresees a “healthy” correction of 20% to 30% from early March prices if the outlined scenario unfolds. However, he suggests the decline could be as much as 40% if BTC rallies to $60,000-$70,000 in the coming weeks. Despite this temporary plunge, Hayes remains optimistic about bitcoin’s resilience, emphasizing its status as a neutral reserve hard currency that is not a liability of the banking system and is traded globally. In a recent podcast appearance, Hayes expressed the view that the business model of U.S. dollar stablecoin issuer Tether will be challenged once multinational banks receive the go-ahead to offer fiat-backed stablecoins. Overall, Arthur Hayes has urged investors to be cautious and to prepare for potential market volatility in March, emphasizing the importance of understanding the interconnected factors influencing both traditional finance and the cryptocurrency market.