KICA partners with PiLab and CODE for Web3 authentication services

Hong Kong and Israel Collaborate to Expand CBDC Access Beyond BanksIn a collaborative effort, the Hong Kong Monetary Authority (HKMA), the Bank of Israel (BoI), and the Bank of International Settlements (BIS) Innovation Hub have jointly released a comprehensive report on Project Sela, a central bank digital currency (CBDC) initiative.Photo by POURIA 🦋 on UnsplashBroadening the role of intermediariesThe report was published to the BIS website on Tuesday. In keeping with the trend of many CBDC projects, Project Sela is characterized by a robust public-private partnership. However, its particular focus lies in broadening the spectrum of intermediaries, aiming to offer retail CBDC services through a more diverse array of service providers, thereby reducing dependency on traditional banks and major payment providers.Andrew Abir, Deputy Governor of the Bank of Israel, emphasized the importance of fostering a dynamic and open ecosystem with a wide variety of service providers. He stated:“Competition and innovation require a flourishing and open ecosystem with many different types of service providers. This was our initial goal in Project Sela as a proof-of-concept, and the project proved the feasibility of the model we had in mind.”Involving retail banksIn a previous model explored through Hong Kong’s Project Aurum, retail banks were entrusted with customer-facing tasks while maintaining the central bank’s operation of the wholesale ledger for the eHKD. In contrast, Project Sela introduces a novel approach where the central bank operates the retail ledger — a model akin to Israel’s digital shekel.The primary actors in Project Sela, known as Access Enablers (AEs), notably do not have control over CBDC balances, distinguishing them from conventional payment providers. Moreover, AEs are not required to maintain liquidity to support CBDC services. Their role encompasses facilitating user onboarding and CBDC access, fulfilling know-your-customer (KYC) and compliance obligations, and routing payments. The role of banks and other “funding institutions” primarily revolves around enabling the conversion of cash and deposits into CBDC.The rationale behind this approach is rooted in the emergence of technological advancements in open banking and DeFi, which have demonstrated the potential to disentangle financial services by granting users greater access to their financial data and control over their own funds.Enabling participation among the unbankedProject Sela envisions the unbanked population utilizing ATMs to convert cash into CBDC. A similar approach has recently been taken by the Chinese authorities. In the resort city of Sanya, authorities have introduced e-CNY ATMs in order to enable e-CNY access for foreign tourists.However, it is noteworthy that in many countries, the primary function of ATMs is to dispense cash rather than accept it. Consequently, the inclusion of AEs could pose challenges to traditional banking institutions, as CBDC adoption could potentially impact bank deposits.Privacy and cybersecurity considerations are implicated within Project Sela. As the central bank operates the retail ledger, ensuring the confidentiality of personal information becomes imperative. To safeguard privacy, AEs employ a hashing mechanism to obfuscate personal identifiers, although the report does not delve into the subject in detail.While Bank of Israel Governor Amir Yaron admitted that a CBDC can never be anonymous, he claimed that “if we choose to issue a digital cash shekel, it will provide at least as much privacy as other digital means of payment.”

Hong Kong Authorities Block Access to JPEX Amid Ongoing InvestigationDubai-headquartered crypto exchange JPEX has been under intense scrutiny in Hong Kong over the course of the past week due to issues experienced by Hong Kong users in withdrawing funds from the platform. In the most recent twist to the saga, authorities in the Chinese autonomous territory have now blocked access to the JPEX website and mobile application.Photo by Tao Yuan on UnsplashCutting off service accessThe firm published a statement on Wednesday, outlining this latest sanction, while protesting that the move had been unreasonable. It appears that the authorities requested local telecommunications providers to block access to the company’s online platform.The measure follows ongoing enforcement actions initiated by local law enforcement agencies, which have led to the detention of at least 11 individuals and the seizure of assets related to the case. The scandal has also had implications for the crypto sector as a whole, as local regulators are now looking once more at regulation and determining if there’s a need to tighten regulatory measures as a consequence of JPEX’s failings in Hong Kong.VPN recommendationIn its statement, JPEX stated:“Since September 13, 2023, the SFC [Securities and Futures Commission] has suddenly made a series of accusations against our platform’s operating model and promotional methods, which we vehemently resent as they were made without investigation or review.”In response to the blocking of their platform, JPEX has encouraged users to utilize virtual private network (VPN) services to access their services. The exchange sought to reassure its user base, stating: “Here, we strongly reiterate that, even in the face of such oppression and unfair treatment, our platform will continue to operate as usual. Users can log into our mobile application or operate on our web version using VPN applications like Surfshark.”The investigation into JPEX was initiated following warnings from the SFC regarding false or misleading statements made on social media by crypto influencers and the trading platform relative to a trading license application.On Sunday, JPEX announced that it had suspended certain operations and increased withdrawal fees due to an ongoing liquidity crisis, triggering an influx of complaints from users. As of Monday night, the police had received a total of 1,641 complaints, with claims amounting to approximately HK$1.19 billion ($152 million) in assets involved, as revealed during a police briefing on Tuesday.DAO Stakeholders Dividend PlanIn response to these developments, JPEX unveiled plans for a “DAO Stakeholders Dividend Plan.” Under this initiative, JPEX users will have the opportunity to convert their assets on the platform into DAO stakeholder dividends at a 1:1 ratio.The exchange intends to distribute 49% of the DAO Stakeholder dividends, with an estimated total value of approximately 400,000,000 USDT available for subscription and conversion. Additionally, JPEX plans to offer repurchase options one year and two years after the program’s launch.New users who subscribe to the DAO stakeholder dividends will enjoy double payouts, and they will not be required to bear all the operational responsibilities of the platform. This move is seen as an attempt by JPEX to address the concerns of its user base and navigate the challenges it currently faces.The situation surrounding JPEX remains fluid, with ongoing investigations and regulatory actions continuing to unfold.

India Offers Suggestions in the Development of G20 Crypto GuidelinesIndia submitted its Presidency Note on Tuesday, contributing to the global framework for cryptocurrency regulation under the auspices of the G20, a forum comprising the world’s 20 largest economies.The document aligns itself with the guidance provided by prominent entities including the Financial Stability Board (FSB), the Financial Action Task Force (FATF), and the International Monetary Fund (IMF).Photo by Swapnil Deshpandey on UnsplashKey Summit topicMany months in advance of September’s G20 Summit in New Delhi, it was clear that crypto regulation would be a key subject for discussion. The FSB’s guidelines, released in July, offer a comprehensive framework for regulating various crypto assets, particularly stablecoins, based on existing standards and principles. These guidelines encompass crucial aspects such as governance, risk management, disclosure, supervision, and cross-border collaboration.In May, the FSB’s Regional Consultative Group for Asia met in Cebu, in the Philippines. During that meeting, the FSB highlighted the risks implicated by digital assets.Published in June, the FATF guidelines put forth a universally applicable set of rules to combat money laundering and counter the risks of terrorist financing linked to cryptocurrencies. One of the main provisions is the “travel rule,” compelling crypto service providers to share customer information when conducting fund transfers.While the IMF guidelines are expected to be unveiled in August, they will encompass a synthesis paper that offers a comprehensive roadmap for crypto regulation. This roadmap is designed to reflect input from multiple stakeholders and jurisdictions.India’s supplementary additionsAmidst endorsing these global crypto guidelines, India also proposes supplementary additions, particularly highlighting the challenges faced by developing economies in the crypto realm. The document underlines that these nations may grapple with capacity and resource constraints when implementing effective crypto regulation and supervision.Furthermore, they might require more extensive access to reliable data regarding crypto activities and associated risks. Developing economies are also at a heightened risk of falling victim to illicit crypto use, including money laundering, tax evasion, and cyber-crime.In light of these concerns, India advocates for the inclusion of developing economy-specific considerations in the FSB’s guidelines. The country also urges for technical assistance and capacity-building support to be extended to these nations. Additionally, it proposes a global outreach initiative to raise awareness of the risks, commencing with nations experiencing higher levels of crypto adoption.Broadening the scopeAnother noteworthy suggestion from India is an extension of the regulatory approach beyond the G20’s scope, encompassing the broader digital economy. While recognizing that crypto is merely one facet of the sweeping digital transformation reshaping multiple sectors, India’s document underscores the need for enhanced cooperation and coordination among various stakeholders and authorities at both national and international levels.In this vein, India proposes that the G20 contemplate formulating a comprehensive framework for the digital economy. This framework should encompass a wide array of concerns, including data governance, digital taxation, digital identity, digital inclusion, and fostering digital innovation, according to the document.India’s exploration of diverse aspects related to cryptocurrency — ranging from legal status to taxation implications, central bank digital currency (CBDC) potential, and innovation possibilities — further underlines its desire to see greater international cohesion in relation to the regulation of digital assets.