Dubai regulator tightens crypto marketing rules

Tether Critics Point to Previous Chinese Securities BackingUSDT stablecoin issuer Tether (USDT) has long faced persistent scrutiny and criticism due to the lack of transparency surrounding the assets backing their digital currencies. The latest allegations come in the form of a report by Bloomberg on Friday suggesting that the world’s largest stablecoin was once backed by securities issued by Chinese companies.Photo by Manuel Joseph on PexelsNYAG releases documentsThese findings were based on documents made public by the New York Attorney General (NY AG). The documents disclosed that Tether had listed securities issued by China’s state-owned Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China as part of its reserves backing the USDT stablecoin.Rumors about USDT’s exposure to Chinese securities have circulated for a number of years. In 2021, a Bloomberg research report revealed that Tether’s reserves reportedly included billions of dollars in short-term loans to China-based companies, as well as a significant loan to the collapsed crypto lender Celsius Network.However, in February 2021, Tether reached a settlement with the NY AG’s office over accusations of providing misleading information about its reserves and losses. To address these concerns, Tether handed over documents such as letters, bank accounts, reserve holdings, and wallet addresses through the law firm Steptoe.Attestation reportTether’s latest attestation report for Q1 2023, released on May 10, offered further details about its reserves. According to the report, Tether’s reserves were valued at $81.8 billion at the end of the quarter, a significant increase from the earlier period of $14.8 billion. These reserves consisted of $53 billion in US Treasuries, $1.5 billion in Bitcoin, and $5.3 billion in loans described as “over-collateralized.”The disclosure of Tether’s previous backing by Chinese securities adds another layer of complexity to the stablecoin landscape, raising questions about the risk exposure and potential impact on the stability of these digital assets. Using Chinese commercial paper to back a US dollar stablecoin is a risky endeavor.It raises the same issues as we’ve seen with the plethora of crypto lenders that went bankrupt in 2022. In those cases, they were using customer money to speculate and turn a profit. That’s fine when it works but when it goes wrong, it is customers who suffer. In its defense, Tether has stated that it only held A1 rated banking sector Chinese commercial paper in 2022 in state-owned Chinese companies like Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Agricultural Bank of China Ltd. It reduced this exposure to zero later that year.With the cryptocurrency community and regulators seeking greater transparency and accountability, the industry is likely to face increased scrutiny and calls for enhanced regulations to ensure the integrity of stablecoin operations moving forward.As regulators continue to assess and navigate the evolving crypto market, it remains to be seen how the industry will address these concerns and establish clearer guidelines for stablecoin issuers to ensure the trust and confidence of market participants.

Binance’s Entry Followed by Increased Scrutiny on Foreign Executives in Korean Crypto FirmsSince Binance’s acquisition of South Korean crypto exchange GOPAX earlier this year, it appears that South Korean financial authorities have tightened their oversight of virtual asset service providers (VASPs), according to an article by local news outlet News1.Photo by Vadim Artyukhin on UnsplashAuthorities had previously instructed existing VASPs to report any changes in their location or registered executives. However, according to industry sources on Monday, authorities recently issued a notice to VASPs, emphasizing the importance of reporting the appointment of foreign executives as well. This change in authorities’ approach is not unrelated to the recent incidents involving Binance and GOPAX, which have caused ripples in the Korean market.Ongoing leadership changesBinance acquired a majority stake in Streami, the operator of GOPAX, back in February after GOPAX struggled to make principal and interest payments on its own decentralized finance (DeFi) service, GOFi, in the wake of the FTX collapse that happened in November 2022. In doing so, Binance injected capital into GOPAX in order to provide a solution for the issue.This marked Binance’s entry into the Korean market, with the number of monthly active users in the country soaring since then. A survey conducted in June by blockchain-based polling app Cratos also revealed that the Korean public had an overall favorable opinion towards the acquisition.Following the acquisition, Streami underwent multiple leadership transitions with Lee Jun-haeng resigning and Binance’s Asia Pacific Head, Leon Sing Foong, taking over. Shortly after, Foong also stepped down, and the baton was passed to Lee Joong-hoon, GOPAX’s former Vice President. It is also notable that Foong recently left Binance altogether amid regulatory scrutiny.Streami subsequently submitted reports to the Financial Intelligence Unit (FIU) under the Financial Services Commission in line with requirements to inform the regulatory body about these changes. However, the FIU has not yet granted its approval, likely due to the legal challenges Binance is currently facing in multiple jurisdictions worldwide.In a seeming effort to address this regulatory roadblock, Streami has recently decided to delegate yet another CEO whose identity has not yet been disclosed. This marks the third leadership shift in just half a year.On the other hand, crypto trading platform Crypto.com also acquired the exchange OKBIT last year. However, its process of entering the Korean market was quite different from that of Binance, as the platform received proper approval for changes in executive positions, such as the appointment of Rafael de Marco e Melo as Chief Financial Officer.Mounting roadblocksIt appears that authorities have now decided to form a more robust oversight system, including monitoring changes in foreign executive appointments at VASPs. However, some argue that such regulatory changes could be perceived as a hindrance for global exchanges looking to enter Korea’s lucrative crypto market where there is a high level of investor sentiment from up to seven million individual investors.To operate as a virtual asset business in the country, businesses must obtain preliminary certification for an Information Security Management System (ISMS) and register as a VASP. Obtaining ISMS certification is a time-consuming process, prompting overseas VASPs to enter the Korean market by acquiring businesses that have already received certification in Korea.However, if the entry barriers to Korea increase as authorities start to scrutinize changes in foreign executive positions, global VASPs may reconsider entering the market.

Asian Firms Feature in Ledger’s Institutional Trading OfferingCrypto hardware storage device provider Ledger has recently introduced the Ledger Enterprise Tradelink network with the participation of a number of well-known Asian crypto platforms.Through its Ledger Enterprise Tradelink offering, Ledger aims to provide a robust and open trading platform specifically designed for institutional investors. The company announced its move into the institutional trading technology market via a blog post published to its website on Wednesday.Photo by Kanchanara on UnsplashMeeting institutional needsThis platform aims to meet the unique risk management and regulatory requirements of institutions seeking to participate in the cryptocurrency market.Given recent events, such as the bankruptcy of the FTX crypto exchange, market participants are increasingly seeking transparency and alternatives to traditional vertically integrated crypto exchanges. There are also concerns regarding the future of market infrastructure in light of the recent lawsuits filed by US regulators against major exchanges like Binance and Coinbase.Sebastien Badault, the VP of Metaverse & NFTs at Ledger, highlighted these concerns and emphasized the importance of addressing them. He explained that the Ledger Enterprise Tradelink network enables a seamless connection between custodians, OTC brokers, and exchanges, allowing traders to execute trades without having to hold funds on the exchange itself.This unique feature serves to minimize the risks associated with centralized exchanges. Badault further predicted that as regulations evolve, fund managers will likely be required to distribute their risk across multiple custodial partners, making the Ledger network an appealing solution.Asian partnershipsTo bring the enterprise-grade platform to life, Ledger has partnered with several prominent crypto exchanges and broker firms. These include international companies like Bitstamp, Uphold, CEX.IO, Wintermute, Coinsquare, NDAX, Damex, Flowdesk, and YouHodler. Additionally, Asian platforms feature strongly, represented by the likes of Seychelles-headquartered crypto exchange Huobi, Singapore-based platform Crypto.com, and Thailand’s Bitazza, a digital asset platform.Other participating companies comprise of Komainu, a digital asset custodian backed by Japanese financial services company Nomura, Tokyo-based institution-facing crypto finance firm, Crypto Garage and Hong Kong’s Kryptodian, a digital asset custodian.Other international partners include digital asset custodians TetraTrust and Etana. The partnership depth that Ledger has put in place with its Ledger Enterprise Tradelink product ensures that firms utilizing the network are not locked into a single custodial provider.Crypto.com President & COO, Eric Anziani, praised Ledger’s innovative Trading Operation technology, emphasizing its role in enhancing security and fostering a regulation-friendly landscape for institutional trading. The collaboration with Ledger enables Crypto.com to participate in the Ledger Enterprise Tradelink network, expanding their offerings for institutional clients and strengthening their position within the market.Ledger Enterprise offers real-time tracking of collateral balances and operational status for all participants, providing enhanced transparency and operational efficiency. Furthermore, the platform boasts zero transaction fees, making it a cost-effective solution for institutional investors, as highlighted in the press release.This initiative by Ledger aligns with the industry’s growing demand for regulatory compliance and effective risk management solutions. Consequently, Ledger’s entrance into this space marks an important milestone in facilitating institutional participation and driving further adoption of cryptocurrencies.