Hong Kong moves towards stablecoin licenses as Shenzhen warns of stablecoin scams

Hong Kong Adapts Crypto Regulations to Broaden Market AccessHong Kong’s financial regulator has taken a further regulatory step in its evolving stance on cryptocurrency trading, widening the scope of retail access to digital assets through intermediaries.Photo by Chapman Chow on UnsplashResponding to growing demandThe move follows a surge in interest in spot Bitcoin exchange-traded funds (ETFs) and recent investigations into the unlicensed operations of the JPEX exchange. In a circular published by the Securities and Futures Commission (SFC) on Friday, the regulator explained that the policy shift was prompted by changing market dynamics and growing inquiries from the industry.The new guidelines aim to extend access to a broader clientele and facilitate the direct deposit and withdrawal of virtual assets through intermediaries, all while maintaining stringent safeguards. The circular states:”The policy is updated in light of the latest market developments and enquiries from the industry seeking to further expand retail access through intermediaries and to allow investors to directly deposit and withdraw virtual assets to/from intermediaries with appropriate safeguards.”Cautionary notesDespite this welcome expansion, there are a couple of cautionary notes included within the circular. Hong Kong remains circumspect about overseas virtual asset (VA) products, deeming them “complex” and, as a result, riskier. The circular emphasizes that “VA-related products considered complex should only be offered to professional investors.” For instance, an overseas VA non-derivative ETF is likely to fall into this category.The other condition pertains to potential clients, who will be required to undergo a one-off test to assess their knowledge of investing and ensure they possess the financial wherewithal to manage the risks associated with virtual asset trading. Furthermore, intermediaries must furnish clients with comprehensive risk disclosure statements.The regulator also places an onus on the intermediary to set a limit for each retail client, to ensure that a retail client’s exposure to virtual assets is reasonable. The circular outlines that deposit and withdrawal of client funds should only happen through the use of segregated funding accounts on an SFC-licensed platform.Crypto sector aspirationsThis shift in regulation underscores Hong Kong’s ongoing aspirations to solidify its position as a hub for virtual assets. The territory embarked on a new regulatory regime in June, enabling applications for crypto trading platform licenses. By August, the first batch of licenses was granted, allowing exchanges to cater to retail customers. This marked a notable turnaround from Hong Kong’s prior 18 months of skepticism and hostility toward the cryptocurrency sector.The timing of these regulatory changes coincides with surging interest in spot Bitcoin ETFs, with JPMorgan even suggesting that approval in the US could materialize within months. This shift in regulatory perspective in Hong Kong also follows the investigation and accusations made against the JPEX exchange for conducting unlicensed operations, leading to arrests and the promise to disclose details of licensed applicants. The JPEX scandal has also dampened public confidence in crypto in Hong Kong more recently.Hong Kong is adapting its crypto regulations to be more inclusive while maintaining a cautious approach toward complex overseas virtual asset products. This regulatory shift underscores the region’s determination to foster its status as a leading hub for virtual assets, following a change of heart from its previous stance of skepticism and reluctance towards the crypto industry.

South Korea’s largest cryptocurrency exchange Upbit has opened a special event in celebration of its staking service surpassing a total value of KRW 1.5 trillion ($1.2 billion), where users can participate in a staking quiz to receive 0.002 ETH (approximately $4.60) each. Staking refers to the process of entrusting crypto assets to be utilized for a blockchain’s operations and receiving rewards in return.Photo by Nenad Novaković on UnsplashEvent detailsParticipants in the quiz event will have 30 minutes to complete five quizzes related to Upbit’s staking service. The total reward pool is 210 ETH, which will be allocated to 100,000 participants on a first-come, first-served basis the day after answers are submitted. After completing the quiz mission, ten users who also stake their Ethereum assets will get the opportunity to be selected to receive 1 ETH each. "We organized the event to make more users aware of staking on Upbit and to express our gratitude,” Dunamu, the operator of Upbit, said. Upbit’s growing staking platformUpbit’s staking service was officially launched in January last year. Currently, there are five cryptocurrencies that can be staked on Upbit – Ethereum, Cosmos, Cardano, Solana and Polygon. In particular, the exchange does not manage user assets or entrust them to external parties but stakes them through self-operated validators. All staked assets are stored in a cold wallet. 

OPNX Makes a Play for Struggling Crypto Lender HodlnautIn a strategic move OPNX, the crypto claims trading platform associated with the founders of failed Singaporean crypto hedge fund Three Arrows Capital (3AC), is eyeing the acquisition of Hodlnaut, a beleaguered crypto lender currently undergoing court-supervised restructuring in Singapore.Photo by Meriç Dağlı on UnsplashCompelling offerThat’s according to a person familiar with the matter cited by Bloomberg News on Sunday, together with a term sheet seen by Bloomberg. It’s understood that OPNX has presented a compelling offer to infuse Hodlnaut with a much-needed capital injection of approximately $30 million worth of FLEX digital tokens.These tokens are closely tied to CoinFLEX, a trading platform that ran into difficulty in 2022, co-founded by Mark Lamb and Sudhu Arumugam. The Seychelles-based company rebranded and relaunched as OPNX earlier this year with the 3AC founders on board. The FLEX token holds a current market valuation of around $647 million, according to CoinGecko data.Partial creditor payoutThe OPNX proposal aims to fund a partial creditor payout to facilitate the resolution of pending claims. This proposal comes on the heels of efforts by Hodlnaut’s directors to reach out directly to its users, a move that was met with objections by the interim judicial managers overseeing Hodlnaut’s restructuring. A letter dated July 29 from the administrators confirms this development.Under the terms of the deal outlined in a term sheet, OPNX’s capital injection through FLEX tokens would translate into a 75% ownership stake in Hodlnaut. The restructuring plan, if approved by creditors, would see these creditors receiving 30% of their claims in FLEX and other tokens. Alternatively, they would be entitled to a pro-rata payment of up to 95% of the total available corporate assets, whichever is more favorable to them.Hodlnaut, headquartered in Singapore with operations also in Hong Kong, got caught up in crypto market turbulence, leading to a suspension of withdrawals a year ago. Subsequently, it embarked on a court-monitored restructuring journey in Singapore. Neither Hodlnaut nor its judicial managers have provided immediate comments on the OPNX bid.The founders of Hodlnaut, Simon Lee and Zhu Juntao, had earlier proposed a business sale as a preferable alternative to liquidation. This proposal aimed to provide better outcomes for creditors, who had initially expressed preference for liquidation over a proposed restructuring plan earlier in the year.OPNX reprimandThe journey of both OPNX and Hodlnaut is also marked by legal and regulatory challenges. In April, authorities in Dubai reprimanded Su Zhu, Kyle Davies, Mark Lamb, OPNX’s CEO Leslie Lamb, and Sudhu Arumugam for operating and promoting OPNX without the required local license. Meanwhile, the liquidators of 3AC have alleged a lack of cooperation by Zhu and Davies, as they seek to recover $1.3 billion from the duo, reflecting the losses preceding the fund’s downfall.The 3AC founders recently claimed that they would donate OPNX profits to 3AC creditors. However, Kyle Davies is fighting the efforts of the 3AC liquidator to reclaim funds from the founders.