Arthur Hayes: Chinese monetary policy could ignite crypto market

South Korea’s cryptocurrency market is moving through a period of stricter oversight and policy debate, while major industry players pursue overseas listings against a backdrop of falling market valuations and weaker investor sentiment.Photo by Ori Song on UnsplashAccording to Newsis, financial regulators are close to finalizing penalties for the country’s major crypto exchanges after a wide-ranging review of their compliance systems. The Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) is preparing to issue sanctions such as institutional warnings, fines, and personnel measures against platforms found to have breached anti-money laundering (AML) rules. These actions follow a series of on-site inspections that began in August 2024 with Dunamu, the operator of Upbit, and were later extended to Bithumb, Coinone, Korbit, and Gopax. Authorities plan to determine and announce penalties in the order of these inspections, which concluded in April 2025. Stablecoin debate growsAt the same time, a policy debate is unfolding in the parliament over how far South Korea should go in supporting digital asset innovation. The Maeil Business Newspaper reported that Democratic Party lawmaker Min Byoung-dug has questioned the Bank of Korea’s cautious stance on launching a won-backed stablecoin. The central bank has identified seven main risks associated with such an asset, including possible de-pegging and threats to monetary policy stability. Min argues that the bank is placing too much weight on these micro-level risks. In a recent report, he contended that delaying innovation could lead to larger, structural economic losses and said the risks identified by the central bank can be managed through oversight and product design rather than by avoiding stablecoins altogether. Dunamu–Naver deal targets NasdaqIn the corporate sector, major fintech firms are pushing ahead with international expansion plans. Naver Financial and Dunamu, which operates the Upbit exchange, have endorsed a merger plan involving a comprehensive share swap, according to The Herald Business. The share swap ratio has been set at 2.54 to 1. This development follows earlier reports that the two firms were close to an agreement intended to support a future Nasdaq listing in the United States. Bitcoin slide persistsThese regulatory, legislative, and corporate developments are taking place as market conditions deteriorate. Global data show weakening demand, with spot Bitcoin exchange-traded funds (ETFs) recording about $3.5 billion in net outflows in November, according to Bloomberg, while CoinMarketCap data show Bitcoin prices down roughly 24% over the past month.  Domestic sentiment reflects this caution. In a weekly survey conducted by CoinNess and Cratos, 59.5% of South Korean investors said over the weekend that they expect Bitcoin prices to fall or crash this week, up from 43.6% a week earlier. Only 12.4% of respondents forecast a price increase. Views on the broader market cycle are also shifting. In the same survey, 42.9% of participants said they believe the bull market has already ended. Reflecting this sentiment, Alternative.me’s Crypto Fear & Greed Index is at 15, in the “Extreme Fear” zone as of Nov. 26. 

Taiwan weighs up CBDC following feasibility study completionTaiwan’s central bank, the Central Bank of the Republic of China (Taiwan), recently concluded an in-depth feasibility and technology study on the potential implementation of a wholesale central bank digital currency (CBDC).Photo by Timo Volz on UnsplashGathering feedback and refining designAccording to statements made by Deputy Governor Chu Mei-lie while speaking at an annual event organized for the banking sector by the Financial Information Service Co., an entity that oversees Taiwan’s banking, payment and settlement systems, Chu disclosed that the central bank is now in the process of gathering feedback and refining the design of the CBDC platform.In her keynote speech, Chu underscored the significance of CBDCs in the evolving landscape of digital currencies. She concurred with the Bank for International Settlements’ (BIS) assertion that conventional payment tools and platforms may not always meet the demands of all-day transactions, smart contracts and automatic settlements facilitating simultaneous and irreversible transfers of assets or funds.Supporting asset tokenizationChu emphasized that a nation’s monetary system should be poised to support tokenized assets. CBDCs, she suggested, could potentially offer comprehensive payment and settlement services, integrating tokenization and a unified ledger that harmonizes CBDCs with traditional currencies.The concept of a unified ledger, as explained by Chu, doesn’t imply a single ledger but rather that tokenized ledgers of each economy could coexist and connect through an application interface.This approach aims to ensure interoperability, minimizing the risk of errors in message transmission. Interoperability is also being worked on by financial messaging service SWIFT. It recently collaborated with central banks in Hong Kong and Kazakhstan with a view towards testing a connector that would enable the integration of SWIFT with CBDCs.Additionally, a unified ledger is anticipated to expedite the clearing process, foster a secure trading environment and ensure the safe, reliable and effective execution of currency and asset transactions.International integration of e-CNYChu acknowledged that foreign central banks are actively exploring the feasibility of issuing CBDCs to establish a unified value for all forms of currency. Of the many early-stage CBDC projects that are out there, China’s e-CNY has gathered the greatest momentum.British bank Standard Chartered has been the most recent entity to join the Chinese CBDC international pilot project. Taiwan’s Fubon Bank has enabled its customers to top up e-CNY via mobile banking. The leading CBDC currency has similar collaborations in place with Hong Kong banks, HSBC and Hang Seng Bank.Fubon has also gotten involved alongside Ripple in a pilot program run by the Hong Kong Monetary Authority. Through that collaboration, it is supporting an asset tokenization trial that revolves around Hong Kong’s CBDC, the e-HKD.Chu outlined that in the case of Taiwan, the matter of a CBDC is being pursued cautiously, without a predefined timetable for reaching a conclusion. The monetary policymaker plans to engage in discussions with academic and business sectors to inform its stance on CBDCs.Meanwhile, the central bank is committed to enhancing overall planning related to the CBDC platform, focusing on transaction ease, capacity and innovative functionalities. Chu also highlighted the consideration of offline transaction scenarios in this ongoing process.

Binance Behind New Hong Kong Crypto Exchange Pursuing LicenseThe launch of a crypto exchange named HKVAEX in Hong Kong has raised eyebrows as it appears to be closely connected to the global cryptocurrency giant, Binance.Photo by Florian Wehde on UnsplashResource sharingWhile the two entities do not officially acknowledge any affiliation, they share resources and have some commonalities that suggest a deeper connection, according to a report published by the South China Morning Post (SCMP) on Wednesday.HKVAEX was established in Hong Kong as an independent entity under BX Services Limited. Despite the absence of shared names, official affiliations, or public statements, several clues point to a connection. The logos of Binance and HKVAEX bear a resemblance, and Binance’s official accounts, as well as CEO Changpeng Zhao (CZ), are among HKVAEX’s followers on social media platform X (formerly Twitter).Gaining a foothold in Hong KongIt’s worth noting that Binance’s services are not available in Hong Kong, which raises questions about the motivation behind establishing an independent entity within the city. While HKVAEX appears to be actively pursuing a virtual asset license in Hong Kong, Binance has been relatively silent about its own licensing plans within the Chinese autonomous territory. This move could potentially provide Binance with a strategic foothold in a market that is becoming increasingly significant for digital asset entities.Hong Kong has recently introduced a licensing scheme for digital asset entities, and this development has spurred enthusiasm among such entities to establish operations in the region. Alvin Kan, the Head of Asia at Sei Labs, has noted that Asia is poised to become a major expansion zone for the Web3 sector, with regulatory developments in the US creating opportunities for expansion beyond American borders.Stanley Fung, who currently heads up HKVAEX, previously served as the chief of Huobi’s Hong Kong operations until November 2022, according to his LinkedIn profile. His departure from Huobi coincided with the entrance of crypto entrepreneur Justin Sun into Huobi’s management.In a company-managed Telegram group, HKVAEX has emphasized its status as an “independent crypto exchange” in Hong Kong, separate from Binance. However, it also revealed that it sources liquidity from Binance. Despite asserting its independence and having its own technical team, there have been instances of collaboration between the two entities in Hong Kong, such as a promotional campaign where Binance was referred to as a “partner” in incentivizing the opening of an HKVAEX account.Changing strategyBinance has faced a series of regulatory challenges in recent times. In May, Binance exited the Canadian market due to new regulations related to stablecoins and restrictions on crypto exchanges. In the US, the two leading regulators have filed lawsuits against Binance, CZ, and related entities, leading to the departure of several top officials from the company.The leading global exchange appears to be pursuing a different strategy more recently. It has entered the Japanese and Thai markets through the acquisition of a local entity and a joint venture with a local company. While forced out of the Netherlands, its Dutch customers were moved to rival Coinmerce, which connects to the Binance trading engine and order books.The evolving regulatory landscape is reshaping the cryptocurrency industry, and the relationship between Binance and HKVAEX highlights the complexities and strategies adopted by major players in this evolving space.