Major Korean Crypto Exchanges Strengthen on NFT Projects Despite Crypto Winter

Hong Kong's financial watchdog, the Securities and Futures Commission (SFC), has issued a stern warning against two crypto investment schemes, namely the "Floki” and “TokenFi” staking programs. Offering high annual returnsThese programs, luring investors with enticing promises of annual returns ranging from 30% to over 100%, have triggered concerns within the regulatory authority due to their lack of authorization and questionable nature. In an update issued on Friday, the SFC emphasized that both Floki and TokenFi's staking offerings have not been granted approval for public offerings. Furthermore, the administrators of these programs have failed to provide convincing explanations about the feasibility of achieving such unusually high returns. The SFC cautioned that engaging in staking arrangements involving virtual assets without proper authorization may constitute unauthorized collective investment schemes.Photo by Sigmund on UnsplashUnsustainable yieldThe watchdog expressed its worry about the legitimacy of these staking programs, highlighting that neither has received the necessary authorization to provide services to the public in Hong Kong. Investors participating in these programs would not be protected under the SFC's regulations, potentially exposing them to significant financial losses. With the failure of many crypto platforms in 2022, a number of industry commentators began to question the sustainability of some public offerings. One such commentator, Allen Farrington, General Partner at bitcoin-native venture capital firm Axiom, repeatedly asked, “Where does the yield come from?” That appears to be the SFC’s concern in this instance. In its statement, it reaffirmed its commitment to upholding regulatory standards and safeguarding investors from fraudulent schemes. It warned that any breach of the law, including the promotion of unlicensed collective investment schemes, will result in appropriate legal action. Elon Musk-inspired meme coinFloki, initially conceived as a meme-coin inspired by Dogecoin, a project associated with Elon Musk, has evolved into a comprehensive Web3 project spanning decentralized finance, NFTs and the metaverse. TokenFi is a crypto and asset tokenization platform under the Floki umbrella, which aims to capitalize on the booming trillion-dollar tokenization industry. TokenFi, denoted by the ticker TOKEN, seeks to simplify the crypto and asset tokenization process with aspirations of becoming a leading platform globally. Launched last October, TokenFi operates as a multichain tokenization platform on both Ethereum and Binance Smart Chain. While both Floki and TokenFi offer distinct staking programs, they share a close integration. Stakers under the Floki scheme gain access to a significant portion of TokenFi's supply, while TokenFi stakers earn TOKEN rewards through a user-friendly interface. In the broader context of crypto staking, the practice allows users to earn rewards by contributing to a blockchain's security through the proof-of-stake mechanism. By staking cryptocurrency, users participate in a staking pool, similar to depositing money into a savings account. Staking rewards typically range from 5-20%, attracting investors seeking profitable opportunities. However, caution is advised against schemes promising unrealistic returns. The SFC, in collaboration with the Hong Kong Police Force, established a dedicated working group last year to enhance vigilance and enforcement in the evolving crypto sector. 

Binance Thriving in China Despite Crypto BanWhen China cracked down on cryptocurrency trading in 2021, it seemed like Binance, the world’s largest crypto exchange, would have to leave the country behind. However, nearly two years later, an investigative report carried out by the Wall Street Journal finds that business is thriving for Binance in China.Photo by Hanson Lu on Unsplash$90 billion in monthly tradingThe report, which was published on Wednesday, reveals that users managed to trade a staggering $90 billion worth of cryptocurrency-related assets in China within just one month.Internal data, shared with The Wall Street Journal and corroborated by current and former employees, unveils this underground activity. Remarkably, these transactions propelled China to become Binance’s largest market, accounting for a massive 20% of global trading volume, excluding trades by a subset of major traders.Almost one million active Chinese usersDespite the supposed ban, Binance’s internal discussions highlight the pivotal role China still plays for the exchange. Current and former employees indicate that Binance’s investigations team collaborates closely with Chinese law enforcement. This partnership aims to identify potential criminal activities among the 900,000+ active users in China, underscoring Binance’s efforts to maintain oversight.However, Binance now faces regulatory challenges tied to its secretive global operations. In June, the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its Founder, Changpeng Zhao (CZ), alleging illegal operations and misuse of customer funds.Meanwhile, the Justice Department is conducting its own investigation. A report by Semafor on Wednesday suggests that authorities are considering fraud charges but they’re concerned that such an eventuality may lead to a run on the exchange. This regulatory onslaught has seen Binance’s market share among US users plummet, leading to a reduction of over 1,000 jobs out of its 8,000-strong workforce.Circumventing regulationThe clandestine existence of Binance’s footprint in China offers insights into the exchange’s ability to function surreptitiously in unwelcoming environments. To circumvent restrictions, Binance directed Chinese users to visit local websites with domain names before rerouting them to the global exchange. This tactic allowed Binance to keep a foothold in China, even after the government blocked direct access to its website in 2017.China’s central bank, responsible for imposing the crypto ban, remained silent when questioned about these developments. Binance’s official stance is that its website is blocked in China and inaccessible to users there.Holding on to its China-based users is crucial for Binance as it navigates a treacherous regulatory landscape that threatens its future. The company’s history with China is intricate. CZ established the firm in Shanghai in 2017, only for the government to initiate a series of regulatory attacks on crypto exchanges soon after. This led to concerns about money being illicitly moved out of the country, and Zhao eventually relocated Binance’s operations to Japan.Despite this move, Binance retained a significant workforce in China, a decision that raised concerns among its US arm regarding data control. Binance’s Chinese heritage also attracted attention, with Zhao addressing the company’s challenge of being labeled both a “criminal entity” in China and a “Chinese company” in the West.Binance’s relationship with China remains complex. As the exchange navigates these murky waters, its ability to operate under the radar and maintain its foothold in markets like China will undoubtedly play a significant role in determining its future trajectory.

Malaysia Looking to Wean Itself Off Dollar DependencyAccording to Prime Minister Anwar Ibrahim, China is willing to engage in discussions with Malaysia regarding the creation of an Asian Monetary Fund. This proposal, which has been circulating for decades, aims to decrease the dependence on the US dollar.©Pexels/Sergei StarostinAsian Monetary FundAnwar highlighted the necessity to minimize reliance on the dollar and the International Monetary Fund and proposed the establishment of this fund at the Boao forum in Hainan last week. He stressed that the fund would aid in diversifying the financial landscape of Asia and improving its resilience against economic challenges.Following a state visit to China last week, Anwar stated that “there is no reason for Malaysia to continue depending on the dollar.” The Prime Minister told the Malaysian parliament on Tuesday that China’s President Xi Jingping was receptive to the idea of an Asian Monetary Fund and welcomed further discussions on such a proposal.Anwar Ibrahim, serving as both the Finance Minister and Prime Minister of Malaysia, stated that the country’s central bank is already taking measures to allow for negotiations between Malaysia and China using their respective currencies, the ringgit and renminbi.The robustness of the US dollar poses a significant challenge for Malaysia and other Asian countries, particularly as Malaysia is a net importer of food. In September 2022, the Bloomberg dollar index reached an all-time high, leading to a decline in the value of the ringgit and other Southeast Asian currencies to levels not seen in decades.As a result, Anwar Ibrahim’s proposal for a shift towards bilateral trade negotiations with China using the ringgit and renminbi holds the potential to alleviate some of the region’s dependence on the dollar and reduce the impact of its fluctuations.International shift away from dollarThis development comes as other officials in the region, particularly Singapore, have been discussing strategies to manage the effects of a dominant US dollar that has weakened local currencies and been used as an instrument of economic power by the United States.There has been a raft of deals struck in recent weeks all pointing towards an international shift away from the US dollar as the global reserve currency. Russia has agreed with China to trade in renminbi. A major trade deal was struck recently between China and Brazil that will see the two countries trade in reals and renminbi. Major oil producer Saudi Arabia has made similar soundings and signed similar deals with Beijing.Bitcoin as a reserve currencyAll of this recent upheaval has brought further consideration of bitcoin acting as a reserve currency back into view. It’s expected that even if there is a shift away from the US dollar, the renminbi won’t be capable of acting as a single dominant global reserve currency. Taking to Twitter on Wednesday, Bloomberg Intelligence Crypto Market Analyst Jamie Coutts suggested that bitcoin’s performance in Q1, 2023 marks “a significant milestone in its ascendancy as a potential global reserve asset.”Coutts believes that it marks the first occasion that the leading cryptocurrency has acted as a safe haven asset during a liquidity crisis. Bitcoin remains at an early stage of development. Nobody expects that it could serve as the global reserve currency at this point. However, it is not unreasonable to anticipate it increasingly growing into a role as a reserve currency used for international trade and settlement. Especially so, as issues bubble over relative to banking and a desire to escape the clutches of US dollar domination.