MUFG pushes into tokenized finance as Japan enters a new political chapter

Hong Kong Crypto Exchange Contemplates Sale at HK$1 Billion ValuationHong Kong’s BC Technology Group is reportedly considering the sale of its crypto platform, OSL, with a suggested valuation of approximately HK$1 billion ($128 million).Photo by Samuel Chan on UnsplashDiscussions with potential buyersThat’s according to a report published by Bloomberg on Monday. OSL holds the distinction of being one of only two exchanges alongside competitor HashKey licensed under the digital asset regulations introduced by the city of Hong Kong in June. Bloomberg cited anonymous sources familiar with the matter having revealed that BC Technology has initiated discussions with potential buyers, including industry players and funds.OSL’s platform encompasses prime brokerage, exchange services, and secure custody solutions for the cryptocurrency markets. Furthermore, OSL plays a pivotal role in facilitating financial institutions’ access to virtual asset trading. Rather than a complete sale of the company, BC Technology is considering the possibility of divesting specific parts of the business, according to these sources.It’s important to note that these deliberations are ongoing, and there is no guarantee that they will culminate in a final deal, as highlighted by the insiders. In response to an inquiry from Bloomberg News, a representative from BC Technology stated:“We are a highly transparent and regulated company. We do not comment on market rumors and speculations.”Valuable trading licenseOSL's regulatory licensing is likely to add considerably to its value. Earlier this year it emerged that digital asset sector firms were shelling out a range between HK$20 million and HK$200 million in their efforts to secure crypto trading licenses in Hong Kong.In May the company obtained Type 1, 4, and 9 licensing from Hong Kong’s Securities and Futures Commission (SFC) through its OSL Asset Management (OSLAM) business. Following the acquisition of licensing, the firm moved to launch its first fund, concentrating on blockchain, artificial intelligence (AI), and Web3 technologies.Hong Kong’s crypto hub challengesHong Kong enabled retail-level crypto trading on June 1, with the aim of further establishing the city as a hub for the cryptocurrency sector. The regulatory change enabled retail investors to trade larger tokens such as Bitcoin and Ethereum on licensed exchanges. Despite these efforts, demand for cryptocurrencies remains lackluster due to the lingering effects of last year’s wave of crypto sector bankruptcies.To compound matters, Hong Kong is also grappling with the repercussions of the JPEX exchange scandal, an unlicensed Dubai-headquartered entity that further tarnished the reputation of the digital asset industry in the region.BC Technology’s market value has shown substantial growth, surging to almost HK$1.9 billion from its low point earlier in the year. However, the company’s shares remain down by 80% from their peak in June 2021, which coincided with the cryptocurrency market’s frenzy during the pandemic.In response to market developments, OSL has withdrawn its application for a digital asset license in Singapore and it is preparing a revised submission. It’s worth noting that certain clients from Singapore are being transitioned to the exchange in Hong Kong.

In a bid to expand the utility of USDC (USD Coin) in Japan, Coincheck, a cryptocurrency trading platform based in Tokyo, has unveiled a strategic collaboration with Circle Internet Financial, the global fintech firm and the issuer of the USDC stablecoin. Broadening USDC accessibilityThe partnership, announced on Feb. 27, signals Coincheck's proactive stance towards broadening accessibility to the USD-pegged coin within Japan's cryptocurrency landscape. This move is particularly noteworthy given Coincheck's stature as a subsidiary of Monex Group, a major securities firm that acquired a controlling interest in Canadian crypto asset management firm 3iQ in December of last year. Coincheck, established in 2014 and boasting a user base of 1.91 million verified accounts as of January 2024, is poised to play a pivotal role in driving USDC adoption within Japan.Photo by Takashi Miyazaki on UnsplashRegulatory hurdlesRegulatory hurdles remain significant for the widespread adoption of USD-backed digital assets within the east Asian country. Presently, major Japanese cryptocurrency exchanges have refrained from listing such coins, awaiting regulatory approval under the jurisdiction of the Japanese Payment Services Act, which mandates obtaining "Electronic Payment Instrument Services" registration. Despite these challenges, fiat-pegged coins like USDC and USDT continue to enjoy substantial popularity across Asia, reflecting a burgeoning interest in stablecoins as reliable vehicles for value transfer and storage. Oki Matsumoto, managing director and chairman of Coincheck, emphasized the strategic significance of the partnership in catalyzing growth within Japan's crypto ecosystem and the broader blockchain industry. He expressed optimism regarding the collaborative efforts between Coincheck and Circle in advancing the adoption of digital assets in the Japanese market. Circle’s ongoing focus on JapanCircle's engagement with Japan is not unprecedented, as the company had previously entered into a memorandum of understanding (MOU) with SBI Holdings, a formidable player in Japan's financial sector. This partnership aimed to spearhead digital currency innovation, streamline cross-border transactions and enhance liquidity in the digital asset market. Last month Circle identified the Asia-Pacific (APAC) region as being ripe for stablecoin adoption. It outlined that it was particularly encouraged by the ongoing development of forward-looking regulatory frameworks in Asian centers like Singapore, Hong Kong and Japan. In a parallel development, Circle recently announced a partnership with Overdare, a joint venture which was originally formed in September between gaming firms Krafton and Naver Z, poised to redefine the landscape of mobile user-generated content (UGC) gaming. This collaboration seeks to empower game content creators by integrating Circle's user-controlled Programmable Wallets, enabling them to seamlessly receive USDC payouts for their creative endeavors. Circle's foray into the creator economy through its collaboration with Overdare demonstrates another strategy that the company is employing to bring about adoption and gain traction in the market, pivoting towards Web3 innovation and its emphasis on development within the APAC region. With USDC boasting a market capitalization of approximately $27 billion and circulating supply exceeding $24 billion, as reported in its December 2023 reserve attestation, Circle's strategic partnerships with Coincheck and Overdare herald the latest efforts to trigger adoption within the Japanese and broader APAC region’s cryptocurrency and gaming spheres.   

Crypto Winter Halves Korean Bank Fee ProfitsLast year, Korean banks collected only half the amount in fees from crypto exchanges compared to the previous year, according to Korean news agency News1.©Pexels/PixabayDeclining bank fee profitsFiles submitted by the Korean Financial Services Commission to Yun Chang-hyun, a member of the ruling People Power Party, revealed that the five major Korean crypto exchanges paid 20.4 billion KRW (~$15.6 million) in fees to banks last year, which is a 49.4% decrease from the previous year’s 40.3 billion KRW (~$30.7 million). These exchanges (Upbit, Bithumb, Coinone, Korbit, and Gopax) have established agreements with banks to hold real-name bank accounts, which is a legal requirement for exchanges that wish to conduct trades in Korean won.Banks that have provided real-name accounts to crypto exchanges saw an increase in fee profits from 2019 to 2021. However, due to a decline in market sentiment last year, trade volume decreased, resulting in a reduction of bank fees. Last year’s crypto winter is attributable to various factors, including uncertainties in the global economy and collapses of crypto enterprises such as Terraform Labs and FTX.Fees by exchangesIn terms of fees paid to banks by exchanges last year, the largest exchange, Upbit, paid 13.9 billion KRW (~$10.6 million) in fees to Kbank, a mobile banking service provider. Bithumb and Coinone paid 4.9 billion KRW (~$3.7 million) and 989 million KRW (~$750,000) in fees to NH Bank, respectively. It is worth noting that Coinone switched its bank from NH Bank to Kakao Bank last November, paying 72 million KRW (~$55,000) to Kakao Bank in the fourth quarter. Korbit paid 486 million KRW (~$370,000) and 19 million KRW (~$14,500) to Shinhan Bank and Jeonbuk Bank, respectively. Gopax partnered with Jeonbuk Bank to obtain its real-name accounts in April last year.Lawmaker Yun said it was apparent that partnerships were being forged between only a handful of banks and crypto enterprises. Current regulations have to be reviewed to encourage more banks to participate in various blockchain businesses, he added.