Regulatory crackdown as Hong Kong authorities act against crypto entities

UAE Issues New Guidance on Crypto AML MeasuresUnder new guidance issued by the Central Bank of the United Arab Emirates (UAE), crypto businesses will be subject to strengthened anti-money laundering (AML) and countering the financing of terrorism (CFT) measures.Photo by Joshua Miranda on PexelsTightening AML regulationThe guidance, first compiled in February but released on Wednesday, which takes into account the recommendations of the Financial Action Task Force (FATF), has been introduced to enhance the supervisory and regulatory frameworks and combat financial crimes. The rules are set to come into effect within a month.The Central Bank’s guidance specifically targets Licensed Financial Institutions (LFIs) in the UAE, encompassing banks, finance companies, exchange houses, payment service providers, registered hawala providers, insurance companies, agents, and brokers. These entities will now be required to comply with the new regulations to prevent money laundering and terrorism financing activities.Firm foundationsIn a written statement, His Excellency Khaled Mohamed Balama, Governor of the UAEs Central Bank, expressed the importance of the new guidance in strengthening efforts to combat financial crimes. He emphasized the commitment to protecting the financial and monetary system’s soundness and stability, aligning with the FATF standards.The issuance of the guidance comes as the UAE aims to attract crypto businesses to the region by offering a welcoming but effective regulatory framework. In March, Dubai unveiled a dedicated agency responsible for virtual asset regulation, signaling its commitment to fostering a favorable environment for crypto-related activities. Its Virtual Assets Regulatory Authority (VARA) has also taken action against what it deems to be unregulated activity in the crypto space recently.That action together with the approaches taken by Abu Dhabi and at a national level the UAE itself with respect to digital asset licensing is indicative of a territory that is setting out the right foundation upon which to develop the innovative sector. The approach taken by regulators in the UAE has garnered praise from major crypto firms, including Coinbase, who have applauded the region’s proactive stance on regulation.The strengthened regulatory framework is expected to contribute significantly to the UAE’s ongoing efforts to prevent money laundering and the financing of terrorism. By implementing these measures, the UAE aims to safeguard the integrity and stability of its financial and monetary systems while fostering a secure environment for crypto businesses to thrive.Global regulatory effortsThe UAE’s AML guidance comes amid ongoing efforts globally to come to terms with virtual assets. Tomorrow Japan will implement its adherence to the FATF travel rule regulation relative to digital assets. Crypto businesses like bitFlyer are already adjusting to that eventuality, while also implementing a similar standard in international markets.As the UAE continues to position itself as a leading hub for the crypto industry, the introduction of these new AML rules demonstrates its proactive approach to regulation. The collaboration between the Central Bank and other global regulatory bodies, such as the FATF, showcases the UAE’s commitment to international cooperation and the sharing of knowledge and best practices in the ever-evolving crypto landscape.

Korean Financial Authority Orders Suspension and Levies $1.4M Fine on Crypto Lender DelioDelio, a cryptocurrency lending company based in South Korea, has received a directive from the financial regulatory authority to cease its operations for a duration of three months, according to local news agency Yonhap. Additionally, the company has been levied with a fine amounting to KRW 1.896 billion ($1.4 million).Photo by Riva Ferdian on UnsplashExecutive dismissal recommendedThis announcement was made on September 1 by the Financial Intelligence Unit (KoFIU) under the South Korean Financial Services Commission. In addition to the measures mentioned above, the KoFIU advised the company to remove one of its executives.As a virtual asset service provider (VASP) registered with the financial regulatory authority, Delio offered deposit services with an annual yield reaching up to 10.7%. However, in June of this year, the company abruptly halted its withdrawal services, prompting investigations conducted by both the KoFIU and public prosecutors.Involvement with unregistered VASPsThe KoFIU saw that Delio had engaged in trading activities with unregistered VASPs and had also breached the restrictions on the trading of affiliate-issued virtual assets. These actions are prohibited under the Financial Transaction Information Act.The financial authority identified a total of 171 instances in which Delio facilitated the transfer of its customers’ virtual assets to unregistered VASPs located outside the country. Additionally, the authority also uncovered the company’s engagement in storing the virtual assets of unregistered VASPs.It was also discovered that Delio had not only neglected to assess the risks of money laundering before introducing new products or services but had also failed to fulfill Know Your Customer (KYC) obligations.

Venture Smart Financial Holdings Ltd. (VSFG), a Hong Kong-based financial services firm, is strategically positioning itself to enter the growing cryptocurrency exchange-traded fund (ETF) market, with its latest reveal being an interest in launching a spot ETH ETF in Q2.Photo by Michael Förtsch on UnsplashIn a recent interview with The Block, VSFG Chairman Lawrence Chu revealed the company's plans to apply for a spot ether ETF in Hong Kong. Executing on that plan is contingent upon the successful launch and approval of its spot bitcoin ETF. Q1 launch for bitcoin ETFLast month, the firm disclosed that it is gearing up for a spot bitcoin ETF launch within the first quarter of this year. VSFG was the first to reveal such an intention within the ETF space in Hong Kong. However, competition is already starting to bubble, as subsequently, Chinese asset manager Harvest Fund announced that it has gone one better and actually filed an application for a spot bitcoin ETF product in the Chinese autonomous territory. Chu shared insights into the firm's current status, mentioning that VSFG is in the final phase of preparing its application for a spot bitcoin ETF to be submitted to the Hong Kong Securities and Futures Commission. He emphasized the rigorous regulatory discussions that precede such submissions in Hong Kong, characterizing the imminent application as being in the advanced stages, stating, “Submission [for application] is almost like when you're 95% there.” Chu acknowledged the importance of ongoing conversations with regulators, expressing readiness by stating, “but that really depends on the conversation we have with the regulator. We will be ready.” Competitive spotlight on ETF feesHighlighting the evolving landscape in Hong Kong, Chu noted that nearly 10 fund companies are exploring the launch of potential spot crypto ETFs in the city. That call echoes similar comments made recently by Livio Weng, CEO of digital assets firm HashKey. The prospect of a potential fee war among asset managers was also discussed, drawing parallels with developments observed in the U.S. bitcoin ETF market. That seems likely, given that downward pressure on spot bitcoin ETF fees in the United States has also spread to Europe where Invesco and WisdomTree have cut fees by 60% on similar products. Global ether ETPsWhile commentators such as Standard Chartered Bank speculate on the likely approval of spot ether ETF products in the U.S. by May and VSFG indicates a potential Q2 launch in Hong Kong, there are already a number of similar products out in the wild around the world. According to data compiled by crypto data aggregator platform CoinGecko, the top 10 ether funds account for $5.5 billion in value. Among them is the XBT Provider ether exchange-traded product (ETP), the world’s first Ethereum-based security made available on a regulated exchange, namely Nasdaq Stockholm in Sweden, by crypto ETP specialist CoinShares. While the race is on in Hong Kong to launch crypto ETFs, on an international basis, competition is heating up as various global fintech hubs look to kindle what is likely to make up a significant part of the ETF sector pie in the years to come.