South Korean crypto-only exchanges on the brink of closure

Hong Kong unveils comprehensive tokenization regulationsChristopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, shared a roadmap for upcoming regulations within the tokenization sector during his address at the Hong Kong Fintech Week 2023.Photo by Simon Zhu on UnsplashJPEX no hindrance to Web3 growthHui’s announcement at the event on Thursday comes on the heels of the JPEX scandal, a Dubai-based crypto exchange that collapsed amid allegations of having defrauded Hong Kong-based platform users. Hui emphatically stated that the JPEX incident would not deter Hong Kong’s commitment to expanding the Web3 market. Hui stated:“We’ve been asked many times whether JPEX will affect our determination to grow the Web3 market — the answer is a clear ‘no.’”In June, Hong Kong implemented new regulations for cryptocurrency exchanges, opening up locally regulated crypto trading services to retail customers via virtual asset service providers (VASPs). However, the majority of the forthcoming regulatory efforts will extend beyond the crypto sector, focusing on areas such as token issuance, wallets and other related components.Regulatory impact on TradFi and DeFiHui indicated the intention to expand virtual asset regulations, suggesting a potential impact on decentralized finance (DeFi). The planned regulations within the tokenization domain are poised to influence not only the crypto industry but also traditional finance (TradFi).These regulations include the issuance of a circular concerning intermediaries engaging in tokenized securities. Additionally, they entail a circular regarding the tokenization of Securities and Futures Commission (SFC)-authorized investment products. Lastly, they’re inclusive of consultations with banks on digital asset custody services with the involvement of the banking regulator. Furthermore, a joint consultation on stablecoin regulations will be issued by the Treasury and the Hong Kong Monetary Authority (HKMA).Focus on positive impact of tokenizationEddie Yue, CEO of the HKMA, echoed Hui’s sentiments by discussing the positive impact of tokenization. He anticipates that tokenization will fuel the adoption of blockchain payments, particularly involving stablecoins and tokenized deposits. Yue believes that central bank digital currencies (CBDCs) will serve as the foundation and a crucial element for achieving interoperability within this ecosystem.He emphasized the need to tackle crucial questions, such as the legal definitions of tokenized securities and whether Delivery versus Payment (DvP) can be successfully implemented for tokenized securities. Additionally, Yue pointed out the intricate legal considerations and interoperability challenges that are currently being discussed within the central bank community.First tokenized green bond issuanceYue also highlighted Hong Kong’s first-of-its-kind issuance of tokenized green bonds in February and revealed that discussions with the industry are already underway for the next bond.“We, ourselves, assisted the government to issue the world’s first-ever tokenized government green bond earlier this year in order to demonstrate the compatibility of Hong Kong’s legal and regulatory environment with this very new issuance format,” he stated. However, despite the promising outlook, Yue remained grounded on the subject, acknowledging the significant challenges in the tokenization landscape.In a related development, HSBC recently disclosed that it is conducting experiments with tokenized deposits in collaboration with Ant Group as part of the HKMA sandbox.

Hong Kong Exchanges and Clearing Limited (HKEX), the operator of the Hong Kong stock exchange, has announced plans to launch a digital asset price index. The index which the company is marketing as the HKEX Virtual Asset Index Series, will aim to provide for the developing asset class, while complimenting Hong Kong’s overarching efforts to transform itself into a regional digital assets hub. The company announced details of the new product offering in a press release published to its website on Oct. 28. HKEX indicated that the product will go live on Nov. 15, outlining that the product “provides investors with transparent and reliable benchmarks for Bitcoin and Ether pricing in the Asian time zone.”Photo by Kanchanara on UnsplashReference index for Bitcoin (BTC) and Ether (ETH)The firm claims that the Index Series will include a Reference Index for Bitcoin (BTC) and Ether (ETH) while providing a Reference Rate for the two leading digital assets. The Reference Index will be formulated using a 24-hour volume-weighted reference spot price, with that pricing coming from leading virtual asset exchanges. The Reference Rate has been devised with the settlement of financial products in mind. As a result, it will be calculated on a daily basis at 16:00 Hong Kong time. From a compliance perspective, the product complies with the European Union’s (EU) Benchmark Regulation (BMR), being the first such product to be developed in Hong Kong. Additionally, the Index Series will be administered by CCData, a UK-headquartered data and index solutions firm formerly known as CryptoCompare.  Taking to the X social media platform, CCData outlined that the product is underpinned by its data selection process, leveraging its “Exchange Benchmark methodology to provide highly robust real-time and EOD  [end-of-day] reference rates.” The firm added that the offering will introduce “essential benchmarks for the Asian market,” while enhancing transparency and reliability within the digital assets sector, broadening opportunities for market participants across the region. Enabling informed investment decisionsHKEX CEO Bonnie Chan said that the company was pleased to introduce the HKEX Virtual Asset Index Series to meet the region's growing demand for this fast-emerging asset class. “By offering transparent and reliable real-time benchmarks, we seek to enable investors to make informed investment decisions,” she added.Like many other financial services firms in TradFi, HKEX has been getting itself acquainted with the blockchain and digital assets sector. In October of last year, the firm launched a blockchain-based settlement platform called Synapse. The platform relies upon DAML-based smart contracts. Earlier this year, a number of asset management firms launched spot Bitcoin and Ethereum exchange-traded funds (ETFs) on the exchange. In April, a report published by HKEX suggested that the true potential of crypto ETFs had yet to be fully realized, pointing out that a number of regulatory tweaks would be necessary to better support digital asset-based products. HKEX itself could have a greater role to play in the expansion of the digital assets sector in Hong Kong. Last month Hong Kong Legislative Council member Lee Wai-hung called on the platform to expand its range of derivatives, including crypto derivatives.

Global crypto exchange platform KuCoin has announced the arrival of “KuCoin Thailand” (to be also known as “KuCoin TH”) in the Southeast Asian country. In a press release publicizing the development, the company outlined that the new platform has been formed following a rebranding of ERX, the first virtual currency exchange to be licensed and supervised by Thai regulator, the Securities and Exchange Commission (SEC).Photo by Bharath Mohan on UnsplashGlobal infrastructure enhancing service deliveryERX has rebranded to KuCoin Thailand, but the exchange will continue to be operated by ERX Company Ltd, while collaborating with KuCoin and benefiting from KuCoin’s global market presence and global exchange infrastructure. Commenting on what KuCoin brings to the partnership, ERX CEO Att Tongyai Asavanund stated: “With the global infrastructure and resources supporting us, we’re enhancing our ability to deliver localized solutions tailored for the Thai market. KuCoin Thailand reflects our continued mission — strengthened by strong technology and a broader global vision.” ERX Board Director Henry Chen said that the objective is “to build a leading digital asset platform in Thailand with global vision, institutional grade service and state-of-art technology.”Southeast Asian expansionFounded in China in 2017, although operating on a global basis, KuCoin continues to have stronger ties to Asia. Following the implementation of restrictions on crypto trading in China a few years ago, the company moved its headquarters to Singapore, subsequently opting to establish itself in the Seychelles. This latest development further strengthens KuCoin’s credentials within the Asian region. In a blog post, the company marked the event as a “key step forward” in its strategic expansion across Southeast Asia. Existing ERX users have already been migrated over to the new platform. The company has placed a notice on its website advising users to download the KuCoin TH app, which has been made available via Android and iOS. Last month ERX announced that it had received approval from the Thai SEC to activate its Crypto Exchange License. The company was first established in Thailand in 2019. It has been under the supervision of the local regulator since 2020.  The ERX platform was originally built out using AlphaPoint white-label software. It received a digital assets exchange license from the SEC in July 2020. ERX parent company, New York-based digital asset management firm Elevated Returns, has been working within the real-world asset (RWA) tokenization arena for some time. In 2018, the company was involved in a $18 million deal to tokenize the St. Regis Aspen Resort, a luxury hotel and resort located in Colorado, United States. Previously, KuCoin had remained unlicensed in Thailand. In recent times, the Thai authorities have made efforts to block unlicensed exchanges from engaging with investors in Thailand. Last month Thailand’s SEC filed a lawsuit against KuCoin competitor OKX for allegedly running an unlicensed exchange. KuCoin Thailand will compete with eight other licensed exchange businesses within the Thai market. These include WAAN Exchange, Gulf Binance, Thai Digital Assets Exchange, InnovestX Securities, GMO-Z.com Cryptonomics, Upbit Exchange, Bitkub Online and Orbix Trade.