Hong Kong's Mox Bank launches crypto ETF trading

While Pakistan’s Minister of State for Finance and Revenue stated back in 2023 that cryptocurrencies “will never be legalized in Pakistan,” recent events suggest that policy change is now likely.Photo by Hamid Roshaan on UnsplashAttracting foreign direct investmentIn an interview with Bloomberg TV on March 20, Bilal bin Saqib, CEO of the Pakistan Crypto Council (PCC), outlined that the South Asian country plans to move forward towards unbanning cryptocurrency within the country, while establishing a legal framework for such digital assets. The PCC itself was only established in February, with bin Saqib appointed as CEO earlier this month. The role of the PCC is to regulate and integrate blockchain technology and digital assets in Pakistan. The motivation for the proposed change in policy is a desire to attract foreign direct investment into Pakistan. The Trump effectWhen asked “why now,” bin Saqib said that “if [not] now, then never.” Expanding on that theme, he articulated that the return of U.S. President Donald Trump to office combined with his support of cryptocurrency, stands as a “bullish” catalyst for the global development of digital assets. He added: “Trump is essentially flipping the script. Trump signing an executive order instructing regulatory bodies to accommodate digital assets, forming the White House crypto advisory team, creating the U.S. strategic Bitcoin reserve,” . . . “that means that the largest economy in the world is creating it like a valuable national asset.” bin Saqib told Bloomberg that Pakistan is done with sitting on the sidelines and that the country now wants to achieve regulatory clarity on behalf of participants in the crypto sector within the country. He added that there’s a need to establish a legal framework that is pro-business. He added: “We want Pakistan as the leader in blockchain-powered finance, and we want to attract international investment.” Policy u-turnThis new stance on crypto stands in stark contrast to Pakistan’s previous position on cryptocurrencies. The country’s central bank, the State Bank of Pakistan, has warned investors of the risks of dealing in cryptocurrencies on a number of occasions previously, highlighting the fact that no entity is licensed within Pakistan to offer remittance services that implicate crypto tokens.  Earlier this month, bin Saqib outlined that Pakistan is investigating the use of blockchain technology to streamline remittances. The South Asian nation ranks within the top 10 countries in terms of total value remitted each year. At that time, he also confirmed to CoinDesk that Pakistan is exploring real-world asset (RWA) tokenization initiatives.  A report by Chainalysis in 2023 stated that Pakistan is “a world leader in grassroots cryptocurrency adoption.” Wealth preservation was identified as one catalyst for crypto adoption, given that the country has faced high inflation rates in recent years and a devaluation of its sovereign currency. That has led to stablecoins being popular despite a ban being in place on cryptocurrencies all the while. In taking matters forward from this point, bin Saqib said that the PCC is keen to learn from the experiences of jurisdictions such as the United Arab Emirates (UAE), Nigeria, Turkey, Singapore and Hong Kong in determining how best to formulate a pro-business regulatory framework for digital assets in Pakistan. 

NVT Ratio Signals Overvalued BTCThe network value to transaction (NVT) ratio of Bitcoin, which has been staying at a high level since the beginning of the year, has signaled its overvaluation, according to Yonhap Infomax.However, some argue that this will not necessarily lead to a crypto winter, considering that the nature of Bitcoin as an asset has changed and there is no sign of overheating in other indicators.©Pexels/PixabayPrice and NVT ratio correlationYonhap Infomax found out that the correlation between the NVT ratio and the price of Bitcoin over the past six years is -0.35. A value of 1 represents a completely positive correlation, while a value of -1 represents a completely negative correlation.Extending this period to 2010 makes the correlation close to 0, but during the early years, NVT ratios showed high volatility, shooting up to four digits. Such a high volatility doesn’t suggest much correlation. Until 2021, there was a high correlation of up to -0.44.The NVT ratio is calculated by dividing the market cap by the transacted volume. Conceptually, it is similar to the price-to-earnings ratio for the stock market.In 2017, when the crypto market was bullish, the average Bitcoin NVT ratio was 7.3. This number became 8.7 in 2021 when the market experienced a similar pattern. In retrospect, single-digit NVT ratios usually hint at bullish markets.This year so far, Bitcoin has been relatively overvalued, given that the average NVT ratio is 23.6.BTC price recoveryWhen the crypto market sentiment lost its confidence due to the FTX bankruptcy last year, the price of Bitcoin went down to $15,000. It later recovered to the near $30,000 level. The Bitcoin price once had reached an all-time high in 2021, surpassing $65,000.The years that manifested similar patterns as this year were 2018 and 2019. In those years, the Bitcoin NVT ratio plateaued around 20.Uncertain outlookThe NVT ratio itself could point to a possible crypto winter, but researchers say it’s hard to say.Jang Kyung-pil, a research analyst at crypto data platform Xangle, said that people now consider Bitcoin as a store of value rather than a means of transactions, pointing out that BTC’s market value to realized value (MVRV) ratio has hit the bottom at 0.84 and now reached 1.4. According to Jang, MVRV values under 1 indicate undervaluation and those above 3 indicate overvaluation.Jung Seok-moon, head of the research center at crypto exchange Korbit, said that the current NVT ratio signals BTC overvaluation. He added that the Fed is likely to turn dovish in its monetary policy, which would prompt a strong BTC uptrend.

The Hong Kong Monetary Authority (HKMA), the Chinese autonomous territory’s central bank, has launched a scheme which subsidizes projects endeavoring to issue tokenized bonds. Grants of up to $321KThe objective behind the initiative, which was announced in a statement published to the HKMA website on Nov. 28, is to nurture moves towards tokenization within Hong Kong’s capital markets. The initiative, titled the Digital Bond Grant Scheme (DBGS), can be accessed by financial services firms for up to two digital bond issuances. The grant may cover up to 50% of what the HKMA describes as “Eligible Expenses” incurred in the process of issuing and establishing the digital bond. A maximum grant level of HK$2.5 million ($321,000) has been established. Digital bond issuers are entitled to the full grant where both basic requirements and additional requirements have been met. A half grant of up to HK$1.25 million ($160,600) has been established for those issuers who have met the basic requirements. The scheme has been opened to applicants from Nov. 28 onwards, with it having been set out to run for an initial period of three years. To fulfill the basic requirements, a bond must be issued in Hong Kong and either be issued on a decentralized ledger technology (DLT) platform, or the project itself must be based in Hong Kong while being involved in the running of a DLT platform.Photo by Fidel Fernando on UnsplashAdditional requirementsThe HKMA has listed four items under additional requirements. These include a need for a digital bond to be issued on a DLT platform run by an entity that is not an associate of the issuer. The bond issuance, whether effected in one instance or in tranches, must account for a value of greater than HK$1 billion ($128.5 million).  The bond must be issued to greater than five investors who are not connected with or associates of the issuer. Finally, the bond must be issued on either the Hong Kong Stock Exchange or a virtual asset trading platform (VATP) licensed and regulated by the Securities and Futures Commission (SFC). Project EvergreenIn 2021, the HKMA launched Project Evergreen, an initiative geared towards exploring how DLT could enhance processes and efficiency within capital markets. On Nov. 28 the HKMA published an update on the project, outlining that since its foundation, tokenization had gained considerable momentum, with $10 billion in tokenized bonds having been issued globally within the last decade. The Hong Kong government carried out two tokenized bond issuances as part of the project. Due to the second issuance being seven times larger than the first one, the HKMA believes that this accounted for institutional investors being attracted to the bond issuance.  In the update, the HKMA outlined that going forward, the plan is to promote wider adoption of what is viable, within the confines of what is possible. The central bank asserted that the DBGS was established on this basis. The update stated: "To fully reap the potential of DLT, we need to keep pushing the boundaries and explore further innovation." In a related development, a report published by the Financial Times on Nov. 28 suggests that the Hong Kong government is considering offering crypto tax breaks to hedge funds and private equity funds.