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China's authorities have dismantled an underground bank that illicitly utilized cryptocurrency for currency exchange operations between the Chinese yuan and the South Korean won, involving approximately 2.14 billion yuan ($295.8 million). China has a history of imposing strict capital control policies, prompting some individuals and entities to resort to cryptocurrency as a means of bypassing these regulations. According to a report published by local police in Northeast China’s Jilin province, six suspects were apprehended for their alleged involvement in facilitating the illegal operations spanning China and South Korea.Photo by Hyory Liu on UnsplashExploiting cryptocurrency featuresThe suspects purportedly took advantage of cryptocurrency features like transaction anonymity and decentralization to execute foreign currency exchange activities unlawfully. Investigations revealed that the criminal group utilized domestic accounts for fund receipt and transfer, alongside over-the-counter cryptocurrency transactions. Supporting illicit transactionsThe arrested individuals allegedly aided various entities, including South Korean purchasing agents, cross-border e-commerce platforms and import-export trade firms, in circumventing currency exchange regulations between the Chinese yuan and the South Korean won. 

Fonte Capital, an Astana-based investment management company that allocates capital across a broad range of asset classes, including digital assets, launched a spot Bitcoin exchange-traded fund (ETF) in Kazakhstan’s capital city on Aug. 13. The firm is based within the Astana International Financial Centre (AIFC), with the launch prompting AIFC Governor Renat Bekturov to take to X to outline that the product offering is the first spot Bitcoin ETF to be listed within the Central Asian region.Photo by Kanchanara on UnsplashReflecting Bitcoin price dynamicsThe product has been listed on the Astana International Exchange (AIX) and has been assigned the ticker “BETF.” In announcing the offering, Fonte claimed that the ETF “aims to accurately reflect the price dynamics of bitcoin, striving to achieve this performance before fees and fund obligations.”Shares in the ETF are listed in U.S. dollars, with the fund having a “non-exempt” classification, meaning that it can be offered to a broad range of investors, including non-qualified retail investors. Each ETF share will be fully backed by Bitcoin, with Fonte having partnered with BitGo for digital asset custody.  Delivering institutional-grade accessTaking to social media, BitGo described the product offering as a “new era for digital assets” in Kazakhstan. The company asserted that through what it termed “U.S.-regulated cold storage,” the new fund is delivering institutional-grade access to Bitcoin within the region for the first time. Fonte pointed out that the fund “provides investors with a regulated and secure way to include Bitcoin in their investment portfolios without the complexities associated with holding and transferring the underlying asset.” This isn’t the first Bitcoin-related product that the AIX has listed. Back in 2021, it listed iX Bitcoin Exchange Traded Notes, with special purpose company iX Bitcoin SPC Limited acting as the note issuer.  The product differs from the Fonte ETF in that it is backed by shares of ProShares Bitcoin Strategy ETF, a future-based ETF first listed on the New York Stock Exchange (NYSE) in 2021. In comparison, Fonte’s product has the advantage of being directly backed by Bitcoin. The ETF’s backers have pointed out that there are further implications for the ETF’s shareholders. As the product is regulated by the AIFC, Fonte asserts that within that jurisdiction, holders of the product’s shares are protected from the potential reach of international sanctions. In this regard, the product offers further protection as it is not dependent upon overseas issuers.  Overall, the AIFC has played a key role in the development of crypto within Kazakhstan over the course of the last few years. In 2023, it awarded crypto exchanges Bybit and Binance approval to trade within the Central Asian nation.  Binance subsequently launched a local crypto exchange platform in Kazakhstan, achieving full licensing in October 2024. In June of this year, the authority granted its first license for the issuance of a fiat-backed stablecoin.  It emerged recently that Kazakhstan is working towards the establishment of a national crypto reserve, with the administrators of the country’s sovereign wealth fund expressing the desire to commence investment in crypto assets.

Japan Set to Tighten Crypto AML RulesJapan is working on tightening anti-money laundering (AML) rules relative to digital assets shortly. That’s according to a report by local media outlet Kyodo News.The stricter enforcement measures will take effect from June 1. The objective is to include the tracing of cryptocurrency asset transactions into the legal framework relative to AML, and in that way, bringing the application of AML in Japan into line with global standards.Photo by Louie Nicolo Nimor on UnsplashTravel ruleIn December of last year, the Financial Action Task Force (FATF), a global money laundering and terrorist financing watchdog based in Paris, France, deemed that the approach taken to crypto-related AML in Japan fell short of international requirements and best practice.Specifically, it’s the FATF’s “travel rule” that the Japanese are about to implement. Otherwise known as FATF Recommendation 16, the travel rule is a set of guidelines devised to prevent both terrorist financing and money laundering.The measure puts an onus on all crypto companies to screen all crypto transactions that exceed the value of $1,000 or a variance of this amount based on implementation by each FATF member state. As an example, in the United States, the FATF travel rule is being implemented with transaction monitoring being applied on transactions to the value of $3,000 and above.Once identified, the crypto firm must record details of the transaction and communicate that information, including both sender and recipient data, to the authorities. That would involve the sender and receiver’s legal names, their account numbers, and addresses. Relevant transaction activity includes exchanges between one or more forms of digital currency and the transfer of virtual assets.G7 alignmentThe move follows a decision taken at a Japanese cabinet meeting on Tuesday, as a direct response to FATFs recommendations. Following discussions earlier this month, the intergovernmental political forum of the G7 group of countries indicated its support for the FATF’s call for the establishment of the travel rule as a global standard. Japan is currently leading the group through its G7 presidency and likely wants to align with the views of its international peers.The country had been moving towards travel rule implementation in the past but in a less decisive way. Two years ago, Japan’s Financial Services Agency (FSA) requested virtual asset service providers (VASPs) to implement the travel rule. In a self-regulatory approach in 2022, the country’s Virtual Currency Exchange Association issued a recommendation for members to apply the rule.Those approaches lacked teeth, leading to a cabinet decision to amend existing legislation late last year and this more recent move to apply and enforce the rule.Regulatory frameworkWhile Japan may not be top of the class in terms of AML regulation relative to crypto, it is a forerunner in terms of crypto regulation generally. It was the first country in the world to suffer a serious crypto-related failure when the Mt.Gox cryptocurrency exchange collapsed in 2014.The fall-out from that collapse led to the Japanese introducing more stringent regulations although it took until 2017 to get them implemented. As a consequence, when the next major collapse occurred, the fall of FTX in November 2022, the Japanese have fared much better than investors located elsewhere. Regulation meant that a separate Japanese entity, FTX Japan, was established. It had to adhere to stricter conditions, meaning that FTX Japan customers have been allowed to withdraw their funds since February while their international counterparts must undergo a much longer process to recover their funds.