Hong Kong regulators signal embrace of spot crypto ETFs

Hodlnaut to proceed to liquidationCryptocurrency lender Hodlnaut, based in Singapore, is set to undergo liquidation, according to former interim judicial managers, Aaron Lee and Angela Ee.The High Court of Singapore has lifted the protection order it had put in place in respect of the business and efforts to restructure it in August 2022. The decision, formalized with a winding-up order filed on Friday in the High Court, follows a period of trading in 2022 when the company incurred losses of approximately $189 million due to the collapse of the Terra ecosystem in May 2022.The liquidators, tasked with providing regular updates to the more than 17,000 creditors, will oversee the process. Hodlnaut’s crypto assets, amounting to $13.3 million, were locked on FTX before the exchange froze withdrawals and declared bankruptcy last November. Despite a rejected restructuring plan earlier this year, the creditors opted for liquidation, deeming it more favorable to their interests. Aaron Lee and Angela Ee will now act as the appointed liquidators, overseeing the winding-up process under the Insolvency, Restructuring and Dissolution Act of 2018.Photo by Hu Chen on UnsplashCreditors favored liquidationAt an early stage, Hodlnaut founders Simon Lee and Zhu Juntao were in favor of a business sale as a preferable alternative to liquidation. Back in February, there appeared to be some potential of a sale, with several buyers having indicated an interest in the business. The identity of these interested parties was never revealed and the interim judicial managers of the restructuring process later confirmed that no “white knight” had emerged to buy out the business.It became clear in April of this year that creditors preferred liquidation as opposed to attempting to restructure the business. The Algorand Foundation is a leading creditor, with a $35 million exposure to Hodlnaut. In a court filing in April, the Algorand Foundation, alongside other leading creditors Samtrade Custodian Limited and S.A.M. Fintech Pte Ltd., were noted as being opposed to a restructuring.OPNX bidIn August it emerged that controversial crypto claims trading platform OPNX, owned by Three Arrows Capital’s (3AC) Kyle Davies and Su Zhu alongside Mark and Leslie Lamb from CoinFLEX, was mounting a bid for Hodlnaut.OPNX had proposed to provide a capital injection of $30 million. The proposal outlined that this investment would be made in the form of FLEX tokens, the native token of the CoinFLEX platform.Following consideration by the interim judicial managers overseeing Hodlnaut’s restructuring process, it decided not to take up the offer. It was decided that the FLEX tokens had a speculative value and that they were highly illiquid.Additionally, no clear timeline had been provided by OPNX in respect of the repayment of creditors’ debts. Furthermore, the proposal was found to be scant on detail, particularly with regard to payments which were limited to 30% of liabilities. In August the FLEX token experienced a large drop, falling 90% in value.

Phoenix rises 50% on ADX debutDubai-headquartered crypto mining firm Phoenix has debuted on its Abu Dhabi Securities Exchange (ADX). The mining equipment hardware retailer witnessed a 50% surge in its share price following a successful initial public offering (IPO) that raked in $371 million.Photo by Marios Gkortsilas on UnsplashFortuitous IPO schedulingIt emerged last week that the company had adjusted its ADX IPO launch date from Monday to Tuesday to account for the holiday schedule in the United Arab Emirates (UAE) and to “ensure comprehensive participation in the IPO.”That adjustment may have been significant in garnering the level of participation that transpired. Bitcoin and to a lesser extent, the broader crypto market, surged to levels not seen since early 2022. From a low of $876 billion on June 15, 2022, overall crypto market capitalization currently stands at $1.6 trillion.With the Bitcoin unit price having exceeded the $42,000 level on Monday for a time, it’s likely that news of a crypto market resurgence would have aided Phoenix Group’s IPO success on Tuesday morning. In trading on Monday, publicly quoted bitcoin miners such as Riot Platforms, Marathon Digital and CleanSpark had recorded share price gains of between 8 and 11% on the Nasdaq in the United States.Surpassing expectationsTuesday’s trading surpassed the expectations of even the most optimistic analysts, with shares opening at 2.25 dirhams and marking a 50% increase from the IPO price of 1.50 dirhams. The ADX, chosen as the platform for Phoenix’s IPO, was strategically selected due to its alignment with the company’s dynamic vision and the rapidly expanding financial market it offers.The overwhelming response from investors resulted in a 33-times oversubscribed offering, translating into orders totaling $12 billion. The retail portion of the offering experienced an even more astonishing over-subscription rate of 180x.Munaf Ali, Co-Founder & Group MD of Phoenix, sees this milestone not merely as a listing event but as a profound declaration of the Middle East’s ascendance in the global tech and blockchain landscape. He attributes the success of Phoenix’s debut to a burgeoning appetite for financial innovations in the Middle East, underscoring the growing interest in exposure to the cryptocurrency sector among investors in the region.Mining to AI pivotPhoenix’s debut on the ADX occurs at a time when other publicly listed companies in the cryptocurrency sector are reorienting their focus from mining digital currencies to supporting the computational needs of the artificial intelligence (AI) industry. In 2022, the sector generated revenues of $6 billion, a slight dip from the record-breaking year of 2021.Industry analysts, including JPMorgan, posit that the high-performance computing (HPC) sector in AI could prove more profitable than Bitcoin mining. This strategic shift is evident in the rebranding of well-known Bitcoin mining entities such as Riot Blockchain (now Riot Platform) and Hive Blockchain Technologies (now Hive Digital Technologies), emphasizing their diversification efforts.Phoenix, acknowledging the potential of the AI-focused sector, believes it could complement its existing operations and contribute to future growth, aligning with JPMorgan’s forecasts regarding the profitability of HPC in the AI industry.

Dubai's regulator, the Virtual Asset Regulatory Authority (VARA), has been ahead of the curve by comparison with its peers internationally in getting a crypto regulatory framework in place, and now it's moving to tweak those regulations further. In a press release published via ZAWYA on Sept. 26, VARA announced an update to its crypto regulations which specifically deals with marketing. Its addition of “Marketing Regulations for Virtual Assets and Related Activities 2024” applies to virtual asset service providers (VASPs) operating within the Emirate of Dubai. In tandem with the updated regulations, VARA has published a marketing guidance document to assist VASPs in abiding by the regulations, providing detailed instructions and outlining best practices in terms of the application of appropriate marketing activities. Photo by ZQ Lee on UnsplashMandatory disclaimerOne of the new requirements demanded by the regulator is that marketing content related to digital assets should incorporate a disclaimer outlining to investors that there are financial risks associated with digital assets. To that end, from October 1 onwards, VASPs are required to add the following disclaimer, prominently displayed, within product marketing material: “Virtual assets may lose their value in full or in part and are subject to extreme volatility.” In its guidance documentation, VARA has stipulated that any content which contains contradictory messaging or information provided to users in “small print” is not deemed to be acceptable. The rules apply to both licensed entities and any unlicensed entities that attempt to offer a service within the Emirate of Dubai.  Consumer protectionThe motivation behind the regulatory update is the protection of consumers through the prevention of the dissemination of misleading information. The regulator wants consumers to be well-informed about crypto products, such that they’re aware of both the risks and opportunities associated with digital assets. VARA has set out a schedule of fines, broken down by category, with fines of up to 10 million United Arab Emirates (UAE) dirhams (AED), around $2.7 million, applying for those who do not comply. Commenting on the updated regulations, VARA CEO Matthew White stated: “Our updated marketing regulations and the newly issued guidance document reflect our commitment to maintaining Dubai’s position as a global leader in digital finance. We believe that by providing clear and actionable guidance, we can help VASPs deliver their services responsibly, while fostering greater trust and transparency in the market." The Dubai regulator isn’t the only one to home in on the marketing approach taken by crypto service providers. Since October 2023, the UK Financial Conduct Authority (FCA) has implemented new rules which specifically deal with the marketing of crypto products and services. Many crypto platforms found the new requirements too arduous to follow. Some withdrew from the market while others did so on a temporary basis while working towards becoming compliant. Within the European Union, the Markets in Crypto Assets (MiCA) regulation came into force in June 2023. Those regulations demand that crypto service providers provide information and conduct marketing activities in a clear, fair and non-misleading manner.