Hong Kong advances to prepare stablecoin legislation

The Philippines Forging Crypto Reg. Path US Could Learn FromThe Philippines has demonstrated best practice in operating a sensible regulatory framework relative to cryptocurrency while the United States has erred by engaging in regulation via enforcement while responding after the horse has bolted in relation to a string of crypto company collapses. That’s according to Robert De Guzman, Head of Legal Compliance at Philippines-based cryptocurrency exchange Coins.ph.©Unsplash/C BuezaIn an opinion piece published in Forkcast News on Tuesday, De Guzman lays out his view as to what’s required in terms of regulation, while drawing comparisons between the application of regulation relative to crypto in both jurisdictions.The need for “sensible” regulationDe Guzman believes that the crypto industry’s recent failures are a wake-up call for the whole sector. Losses of billions of dollars affected Celsius Network, BlockFi, Voyager Digital, Genesis, and FTX, and led to Silvergate, Silicon Valley Bank (SVB), and Signature banks’ collapse in a week. To maintain consumers’ trust, he believes that sensible regulation is necessary for the crypto exchanges dealing with digital assets.The legal compliance expert cites the FTX collapse. FTX’s Sam Bankman-Fried’s empire was among the largest collapses. FTX pretended to support regulation, but its true nature was an offshore exchange for global clients. Nonetheless, some businesses act on their regulation support by acquiring licenses and complying with central bank audits in the countries of operation.State-level and industry-level regulationThe crypto industry being open to self regulation is one element of the solution, he says. Regulators must proactively protect their consumers from scams and business failures, not just clean up the mess after millions of people have been harmed.Regulatory failuresDe Guzman points the finger at reactionary regulatory action. Regulators filed charges against crypto industry founders after their collapse. Previously, they missed the problems of the largest companies. FTX, based in the Bahamas, was mismanaged, and American regulators only responded after customer issues. Regulations by enforcement, preferred in several countries, wait for failure to happen before taking action. Over-regulation through enforcement pushes platforms offshore, where Wild West-type environments thrive, with clear consequences.Regulators in some countries focus on surface-level questions, like which tokens should be considered securities, while others, like in the Philippines, prioritize execution-level details to protect consumers. Anti-money laundering measures and custody are core issues, with the G-7’s Financial Action Task Force’s Travel Rule likely to be more strictly applied. Active regulation and audits are needed to ensure financial platforms act responsibly with customer deposits. Basic rules need to be put in place through a licensing regime, followed by regulation of market practices like commingling of assets, self-dealing, and trading against customers.The Philippines sensible approach to regulationThe Coins.ph legal guru holds out his home country as exemplary in terms of its approach to regulation. The Philippines’ regulatory regime requires a virtual asset service provider (VASP) license to operate a crypto exchange, as well as additional licenses for other services. The country’s central bank, BSP, directly regulates all crypto exchanges and expands its crypto regulations to adapt to market needs. KYC processes in the Philippines require recognition of valid ID documents from across 82 provinces.Additionally, the BSP expects the industry to cooperate in quarterly audits where they share balance sheet information and disclose digital assets in hot and cold wallets. Regulators in the Philippines are proactive and knowledgeable about the crypto space, which sets a sensible framework based on customer protection.

Japanese Bitcoin treasury company Metaplanet, whose shares are listed on the Tokyo stock exchange (3350/TYO), has taken an important step towards its goal of holding 210,000 BTC by 2027. ‘Asia’s largest-ever equity raise’The firm’s CEO, Simon Gerovich, took to the X social media platform on June 6 to outline details of what he termed “Asia’s largest-ever equity raise.” Gerovich stated that Metaplanet had raised 770.9 billion yen ($5.4 billion) by means of moving strike warrants, implicating 555 million shares. Moving strike warrants are a type of equity warrant through which the strike price changes over time. Photo by Cullen Cedric on UnsplashGerovich claimed that the warrants were issued at a premium to the market due to Metaplanet’s “high volatility and deep liquidity.” The Metaplanet CEO stated that the firm is targeting 100,000 BTC by the end of 2026 and 210,000 by the end of 2027. On June 2, the firm announced that it had acquired its latest tranche of Bitcoin, adding another 1,088 BTC to its corporate treasury. The company paid an average Bitcoin unit price of 15,519,019 yen ($107,000). Metaplanet has adopted the treasury playbook first pioneered by Michael Saylor’s Strategy (formerly MicroStrategy), acquiring the leading crypto asset through a combination of equity issuance, debt financing and opportunistic buying.  Russell Okung, a former professional American football player and well-known Bitcoin proponent, took to X on June 6 to highlight that Saylor “lit the match” through Strategy in the United States.  Okung stated: “Metaplanet just launched the rocket in Asia. When capital moves, narratives follow.”He added that “Metaplanet didn’t just buy Bitcoin. They’re directing global attention toward Japan.” Both Metaplanet and Strategy have appealed to investors who are otherwise not in a position to gain exposure to Bitcoin directly, either as a result of regulatory issues or concerns with regard to the custody of the digital asset.  Corporate treasuries adopting BitcoinIn addition to these companies who have led first with a Bitcoin treasury as their primary attraction, other corporates have added Bitcoin to their corporate treasuries while maintaining their focus on other business activities.  Announcements have come thick and fast over the course of recent weeks, particularly in the Asian region.  A number of Nasdaq-listed companies, including Hong Kong-based Reitar Holdings, Indonesian fintech firm DigiAsia, Malaysia-based Treasure Global and South Korea-based K Wave Media, have all announced the addition of Bitcoin to their corporate treasuries.  Metaplanet’s new funding round will put it on track to achieve the goal of obtaining 210,000 BTC by 2027, equating to approximately 1% of the entire Bitcoin supply. The Japanese firm’s shares have risen in price by over 275% since the beginning of this year. According to BitcoinTreasuries.net, Strategy remains the largest corporate treasury holder of Bitcoin with 582,000 BTC. It’s followed by MARA Holdings, Twenty One, Riot Platforms, Galaxy Digital Holdings and CleanSpark. Tesla, Hut 8 Mining Corp and Coinbase Global also feature prior to Metaplanet which comes in tenth place.

China Launches National Blockchain Center to Develop TalentHaving initially been announced in February, China’s National Blockchain Technology Innovation Center was formally launched on Wednesday. The center is based in China’s capital city of Beijing, and plans to collaborate with existing crypto and blockchain businesses, think tanks that concern themselves with blockchain and digital assets, and local universities in an effort to further advance blockchain technology within China’s borders.Photo by Hanson Lu on UnsplashEnterprise blockchain developmentEncompassed within the National Blockchain Technology Innovation Center lies the Beijing Academy of Blockchain and Edge Computing. The academy’s leading achievement to date has been its development of the ChainMaker blockchain. The state-sponsored blockchain incorporates clusters of high performance servers of 1,000 units or more, and it claims to achieve a throughput of 240 million transactions per second.The blockchain is being geared towards enterprise use, and the sharing of information between businesses. The ChainMaker project team has also developed an immutable storage mechanism called “Hong”. It’s understood that the team plans to open-source that technology in due course. The storage system is being used by around 80 government departments in Beijing to collect and store data.ChainMaker is collaborating with fifty corporations, with most of them being state-owned entities.Linking up separate networksIn these efforts to advance China’s blockchain sector, the Center is being backed by China’s Ministry of Science and Technology. One of its key objectives is to ensure that the research center enables a comprehensive, nation-wide network to link together disparate blockchain systems, including those already built, within China. Furthermore, the Chinese authorities want the Center to support existing industries, serving them by bringing blockchain technology to their operations, and in that way advancing businesses with that added competitive edge.Zheng Zhiming, a leading academic at the Chinese Academy of Sciences said that existing blockchain projects are isolated from each other. Zhiming believes that this is holding them back, impeding their growth. This latest approach through the National Blockchain Technology Center is geared to address that shortcoming.It’s interesting to note that while the Chinese authorities have taken a very hard line in relation to cryptocurrencies, they are very much trying to advance their blockchain sector. Likewise, they are pulling out the stops for China’s central bank digital currency (CBDC) project, the digital yuan or e-CNY.It emerged last week that the Bank of China has partnered with French international banking group BNP Paribas, in an effort to promote further use of the digital yuan among the bank’s corporate clients.A dual strategyMeanwhile in China’s autonomous territory of Hong Kong, the city has been given an implicit mandate from the Chinese central government to open its doors to cryptocurrency-related businesses. Cleverly, the Chinese are covering both eventualities. While they don’t want citizens within mainland China to have access to decentralized cryptocurrencies and dApps, they still don’t want to miss out on any upside that the technology and its innovation may bring.On that basis, Hong Kong has been given the space and freedom to compete for crypto business on a global basis, competing in that respect with other emerging centers such as Singapore and Dubai.