Potential positive impact of monetary stimulus in China

Japan Moves to Allow Startups to Sell Digital Tokens to VC FundsIn a move that further advances Japan’s efforts in the digital assets space, the country is poised to permit startups to raise capital from venture capital firms using digital assets instead of traditional stock.The approval of this approach will provide a broader spectrum of funding options for emerging companies deeply entrenched in the world of blockchain technology.Photo by Bagus Pangestu on PexelsAcceptance beyond conventional assetsCurrently, limited partnerships in Japan are predominantly associated with conventional assets such as shares, stock options, and security tokens defined by local securities laws. However, according to a report published by local financial daily Nikkei Asia on Friday, an impending rule change is set to expand this list to encompass other tokens and crypto assets, heralding a fresh era of investment opportunities in a domain that has remained relatively under-explored within the country.The Japanese government is on track to present the requisite legal revisions to the parliament, with expectations for this transformational move to occur as early as 2024. Unlike traditional shares, blockchain-based tokens offer the unique advantage of swift creation without the need for intermediaries or brokerage services.Consequently, fundraising via digital assets is becoming the preferred choice for companies operating in the cutting-edge realm of Web3 technologies, including blockchain.In Japan, a number of companies, such as the blockchain developer HashPalette, have already raised substantial amounts through token offerings. However, the existing limitations obstructing limited partnerships from investing in tokens have hindered Japanese venture capital firms and institutional investors from partaking in the burgeoning success of Web3 enterprises.Overseas token issuanceTraditionally, startups have resorted to issuing tokens in overseas locations like Singapore and Dubai. On the venture capital front, Japanese powerhouse Skyland Ventures ventured into tokens through its Singapore-based subsidiary.Notably, Japan’s Financial Services Agency (FSA) is contemplating a tax code revision for fiscal year 2024 and beyond, with the objective of exempting crypto assets and tokens from taxes on unrealized gains based on market value. This strategic move aims to eliminate a significant deterrent for potential investors in the field.While venture capital firms are eagerly anticipating this legislative change, some, like B Dash Ventures, acknowledge that the revision of the limited partnership law alone may not trigger an immediate surge in fundraising via virtual currencies. Nevertheless, it marks a significant step toward fostering a more conducive environment for digital asset investment.Removal of limited partnership restrictionsJapan’s forward-looking approach also extends to the removal of restrictions on limited partnerships that previously mandated them to invest more than half of their capital within the domestic market. This move is expected to bolster profits, empower venture capital firms with more substantial capital reserves, and ultimately fuel investment in domestic startups.Japan’s decision to embrace the potential of digital assets for startup fundraising is a progressive move. Initial exchange offerings (IEOs) are already authorized in Japan, but this proposed funding mechanism would offer a new channel through which Web3 innovation can be financed within the East Asian island nation. Given that most Web3 startups raise funds in this way, it will mean that Japanese-based firms in the Web3 space will be able to develop and participate fully as this innovation rolls out further on a global basis.

Nexo DWTC, the Dubai arm of the well-known crypto lender, has obtained initial licensing approval from Dubai’s Virtual Assets Regulatory Authority (VARA), marking a significant milestone in the company’s growth and development.Photo by Carlos Alberto Gómez Iñiguez on UnsplashLending, borrowing and broker-dealer activitiesThe approval grants Nexo the authorization to engage in virtual asset lending and borrowing, management and investment relative to digital assets, together with broker-dealer activities within the region. Commenting on the development, Nexo Managing Partner, CFO and Co-Founder Kalin Metodiev, stated:”Nexo is enthusiastic about the pursuit of new market strategies aligned with the transformative guidance of Dubai's Virtual Asset Regulatory Authority." The United Arab Emirates (UAE) has played a pivotal role in promoting the region as a nucleus for global innovation and governance. Dubai's early adoption of blockchain strategies in 2016 and the establishment of VARA in 2022 underscore its commitment to emerging as a global epicenter for digital asset innovation. This initiative mirrors the city's longstanding influence in the traditional finance sector. Seven million worldwide usersFor Nexo, which caters to over 7 million users worldwide, the Dubai market represents a substantial opportunity for regional expansion and the delivery of premium services. Nexo is cementing its position as a leading digital assets institution. However, it hasn’t always been easy for the company. Amidst the broader cryptocurrency downturn post the 2021 market peak, Nexo faced significant challenges. In 2022 prominent crypto lenders faced bankruptcy, drawing heightened scrutiny towards Nexo given its involvement in similar business activities. This prompted speculations about the platform's sustainability. Additionally, Nexo grappled with regulatory pressures, notably agreeing to a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) for failure to register the offer and sale of its Earn Interest Product (EIP). It also faced money laundering charges in its home base of Bulgaria. These charges were later dropped. Subsequently, the company pursued $3 billion in damages from the Bulgarian state, refuting allegations that brought disrepute to the company following an investigation that found no evidence against it. Reflective of a more positive outlook more recently, Nexo Co-Founder Antoni Trenchev took to CNBC on March 1, offering his prediction that Bitcoin is on target for a $100,000 unit price in the not-too-distant future. VARA, established in March 2022 following the enactment of Law No.4 of 2022, assumes the responsibility of regulating, supervising and overseeing virtual assets and virtual asset activities across all zones in the Emirate of Dubai, excluding the Dubai International Financial Centre. VARA's pivotal role in crafting an advanced legal framework is geared towards safeguarding investors, setting international standards for virtual asset industry governance and bolstering the vision of a borderless economy. Nexo's attainment of initial approval from VARA signifies a major breakthrough in its expansion efforts, underscoring its commitment to compliance and innovation in the digital asset space. This achievement positions the company as one of the few crypto lenders making inroads into the influential Dubai market. 

Bitget withdraws from Hong Kong crypto marketSeychelles-incorporated cryptocurrency derivatives platform Bitget has made a decision to permanently exit the Hong Kong market, discontinuing its efforts to obtain a virtual asset trading platform (VATP) license.Photo by SHUJA OFFICIAL on UnsplashBitgetX platform shutdownThe decision comes only months after it had introduced its BitgetX platform to comply with local regulations. The company, which bases its operations out of Singapore, is a well-known entity in the crypto space, renowned as the operator of the 12th-largest cryptocurrency exchange globally in terms of 24-hour trading volume. It made this revelation on Monday, citing what it referred to as “business and market-related considerations.”In a published statement, the company said:”With a heavy heart, we regret to inform you that due to business and market related considerations, we have decided not to pursue a Virtual Asset Trading Platform (VATP) license in Hong Kong. As a result of this decision, the BitgetX website (www.BitgetX.hk) will cease its operations effective December 13, 2023. At the same time, Bitgetx.hk will permanently exit the Hong Kong market.”While outlining that BitgetX will close its doors, the firm urged users to withdraw their assets beforehand. Bitget is among a handful of exchanges that had publicly expressed their intent to secure a license following Hong Kong’s proactive push over the course of the past year to embrace the virtual asset sector.Broader challengesThe decision to abandon the pursuit of a VATP license echoes the broader challenges faced by the cryptocurrency industry in Hong Kong. Despite the city’s recent enthusiastic regulatory embrace of the virtual asset sector, a number of stumbling blocks remain.High compliance costs and the lingering aftermath of the JPEX financial scandal have hindered Hong Kong’s aspirations to establish itself as a leading crypto hub. A report back in June identified the major cost implications of acquiring a license in Hong Kong. At the time, it was estimated that the required spend to obtain a VATP license could range from $2.55 million to $25.5 million.Banking crypto companies has also become a major bottleneck. In June, the Hong Kong Monetary Authority (HKMA) urged banks such as HSBC, Standard Chartered and the Bank of China to bank the crypto sector, having identified a reluctance amongst them to do so.Limited interestThe forthcoming closure of BitgetX adds to a growing trend of limited interest in Hong Kong’s new licensing scheme. Only five companies, all local, have submitted applications for virtual asset licenses to the Securities and Futures Commission (SFC). This list began publication in response to the JPEX scandal, which significantly damaged public trust in virtual assets.The challenges faced by the industry go beyond regulatory hurdles. The damaged public trust, coupled with the high-profile exit of JPEX, has contributed to the hesitancy of international crypto platforms in pursuing licenses in Hong Kong. The abrupt withdrawal of Bitget raises questions about the viability of Hong Kong as a central player in the cryptocurrency industry and underscores the complexities faced by exchanges navigating the evolving landscape of the digital asset sector.