Chinese tech groups pause Hong Kong stablecoin plans amid regulatory scrutiny

Klasha, a leading global cross-border payment company based in Africa, has officially announced its partnership with Singapore-headquartered FOMO Pay, a digital payment, banking and digital assets solutions provider in the Asian market. Streamlining collections and paymentsIn a press release published on Wednesday, the two companies outlined the nature of the partnership. Through this collaboration, FOMO Pay will optimize collections for its corporate clients by leveraging Klasha’s platform. This synergy enables businesses to receive payments in various local African currencies and methods, with the added flexibility of receiving payouts in their preferred currencies.Photo by George Bakos on UnsplashUnlocking growth opportunitiesThe duo also envision the unlocking of growth opportunities for Asian businesses looking to expand into new markets within Africa. By facilitating seamless cross-border payments, Klasha and FOMO Pay believe that they can help businesses diversify and broaden their customer base. In the joint statement, the management teams of Klasha and FOMO Pay expressed their enthusiasm for the collaboration. Jess Anuna, CEO of Klasha, shared her insights, stating:"With combined efforts, we will continue to enable merchants in Asia to collect payments from the continent more seamlessly through our payment rails and our unique ability to terminate payments in greater Asia." Africa has been undergoing a transformation from the perspective of trade relationships while Asia is emerging as a pivotal trading partner, contributing to over 40% of both exports and imports for the continent. It is with that in mind that Klasha and FOMO Pay have united to introduce a platform aimed at enhancing cross-border payment capabilities for businesses and merchants across Africa and Asia. Crypto credentialsFOMO Pay claims to be Asia’s first licensed gateway connecting fiat currencies and cryptocurrencies. The firm was established in 2015 and is regulated by the Monetary Authority of Singapore (MAS) to conduct cross-border money transfer services, domestic money transfer services, digital payment token services and merchant acquisition services. In 2022 FOMO Pay announced a partnership with enterprise blockchain firm Ripple, which resulted in the fledgling company using Ripple’s On-Demand Liquidity (ODL) offering, a product that revolves around the use of Ripple’s XRP in moving value globally, without the need for correspondent banking relationships. In July of last year, FOMO partnered with crypto compliance and blockchain analytics firm Elliptic. That partnership is aimed at building out a payment ecosystem in Asia that offers seamless interoperability between fiat currency and cryptocurrency. With that same goal in mind, last September FOMO Pay initiated a collaboration with crypto sector decision making specialist, Notabene, who are helping the company optimize in terms of know-your-transaction capabilities. Zack Yang, co-founder of FOMO Pay, emphasized the partnership's significance, stating:"In this era of globalization, the synergy between FOMO Pay and Klasha marks a significant milestone in increasing financial connectivity between Africa and Asia. Our partnership is more than just a business collaboration; it's a commitment to fostering seamless payments and economic growth across continents. This collaboration not only opens up new avenues for African and Asian merchants, facilitating market expansion and easing entry into new territories, but also provides greater opportunity for merchants in those regions to fully benefit from day-to-day use of digital assets in international trade.

The South Korean government and the Democratic Party of Korea (DPK) plan to finalize legislation governing Korean won–pegged stablecoins by March. According to local media outlet DataNews, the two sides will hold a closed-door meeting on Jan. 20 to discuss agenda items related to the proposed Digital Asset Basic Act, widely referred to as the second phase of South Korea’s cryptocurrency legislation. A key sticking point is who should be allowed to issue stablecoins. Financial regulators favor, at least initially, limiting issuance to consortia in which banks hold a majority stake (50% plus one share), citing concerns about financial-market stability. The Democratic Party, however, opposes granting banks majority control. Separately, the draft would require issuers to meet capital-adequacy standards and maintain reserves equal to at least 100% of outstanding stablecoins.Photo by Greg Willson on UnsplashCBDC pilots to streamline public fundsBeyond private stablecoins, the government is also exploring potential public-sector uses for central bank digital currencies (CBDCs), including pilot programs that would deploy CBDC-based deposit tokens. As part of a broader digital transformation push, officials aim to use CBDC rails for a significant portion of public funds administration. By June, CBDC-based deposit tokens are set to be used in an electric vehicle charging infrastructure project: buyers of approved chargers would receive tokens to help ensure subsidies go only to eligible purchases and to shorten settlement times. Regulators are also considering steps to expand institutional access to cryptocurrencies. Under one proposal, publicly listed companies would be allowed to invest up to 5% of their equity in digital assets annually. Eligible investments would be limited to the top 20 tokens traded on the country’s five largest exchanges, with the list reviewed every six months. It remains undecided whether stablecoins, including USDT, would be included. Another planned change would permit the trading of exchange-traded funds (ETFs) that track spot crypto prices. While current law does not recognize digital assets as eligible underlying assets for such products, that is expected to change under the forthcoming legislative revision. Exchanges say caps threaten growthAt the same time, proposed governance changes that could cap controlling stakes at around 15% to 20% have drawn pushback from industry groups. The draft Digital Asset Basic Act would reshape control structures at South Korea’s largest cryptocurrency exchanges—Upbit, Bithumb, Coinone, and Korbit—which together serve roughly 11 million users. Regulators at the Financial Services Commission (FSC) say the measures are intended to curb concentrated influence by founders and major shareholders, and are considering a framework modeled on rules for alternative trading systems (ATS) under the Capital Markets Act. Yonhap News reported that the Digital Asset eXchange Alliance (DAXA)—which includes the four exchanges above as well as Gopax—has warned the proposed governance restrictions could slow the growth of South Korea’s crypto industry. The group argued the changes would dilute the accountability of a clear controlling shareholder, particularly regarding custody and management of customers’ digital assets. DAXA urged regulators to adopt a framework aligned with global standards, warning that stricter caps could increase uncertainty for startups and discourage entrepreneurship and investment. Investors pour $2.4B into overseas crypto ETFsThe lack of domestically available spot crypto ETFs has also driven Korean investors to seek exposure overseas. According to the Korea Securities Depository, as cited by Edaily, Korean investors bought a net $2.37 billion of foreign crypto ETFs between Jan. 13, 2025, and Jan. 12, 2026, placing these products among the top 50 overseas securities by net purchases over the period. Those purchases included a mix of spot-linked products, crypto futures–based instruments, and funds tracking companies that hold digital assets on their balance sheets. Several of the most heavily purchased products involved leverage or options-based strategies, including the T-REX 2x Long BMNR Daily Target ETF ($573.1 million) and the YieldMax MSTR Option Income ETF ($493.9 million). Leverage-heavy demand has been a recurring feature of Korean retail trading. In an October report, Bloomberg noted that prospective homebuyers have increasingly turned to crypto in hopes of building capital, fueling appetite for higher-risk altcoins. Such tokens account for more than 80% of trading volume on local exchanges. 

Japan's Financial Services Agency (FSA) is proposing new legislation in an effort to prevent the assets of Japanese investors held on crypto exchanges from being transferred overseas. According to local news outlet Jiji Press, the Japanese regulator recently put forward the idea of drafting such a bill. It’s thought that the move suggests that the Japanese regulators have learned from the collapses of cryptocurrency exchanges Mt. Gox and FTX. Photo by Jaison Lin on UnsplashLearning from past failuresWhile Japan already had a higher standard of regulation in place prior to the FTX collapse, likely as a consequence of the authorities having experienced the downfall of Mt. Gox in February 2014, there is still room for improvement.  While funds had been ring-fenced for FTX Japan users, those who accessed services advertised in Japan through the FTX app were deemed to have been accessing a service which fell under an international jurisdiction, denying them the same protections otherwise offered to FTX Japan platform users as a consequence of the regulations that had been put in place. Incorporating a holding orderJapanese media outlet Nikkei described this latest move by the Japanese FSA as follows: “The Financial Services Agency is moving towards creating a new ‘holding order’ in the Payment Services Act, which regulates cryptocurrency exchanges, that will order them not to take domestic assets entrusted to them by customers overseas.” Consequently, the regulator is looking to add this as the latest proposed amendment to the Payment Services Act. Back in September it emerged that amendments to that existing legislation were being looked at with a view towards making it easier for businesses to incorporate digital assets into their service offerings. The regulator has also been mulling over the reclassification of crypto as a financial instrument by amending the Payment Services Act accordingly. Additionally, a more generous tax policy is being proposed. Currently, the Japanese authorities impose a tax rate of up to 55% on cryptocurrency-related revenues. Corporate holders of digital assets have to apply a 30% tax rate, irrespective of income or profits. With that, a 20% tax rate is being considered. The matter became a political issue prior to the East Asian nation’s recent elections, with the leader of the Democratic Party for the People (DPP) backing the application of a 20% crypto tax rate. The application of a holding order has applied previously to companies that have been registered under the Financial Instruments and Exchange Act. This proposed amendment would see it applied to virtual asset trading platforms as part of the Payment Services Act. Guarding against bankruptcy lossesIf applied, the amendment would prevent loss of Japanese investor funds in circumstances where a crypto exchange platform goes into bankruptcy. Legal precedent set in the FTX bankruptcy in the United States means that if a user’s funds go into a non-individually segregated hot wallet belonging to an exchange, any property rights, even if explicitly outlined in the terms of service, are lost.  A company can make a case to go into bankruptcy in any international jurisdiction, which means that this precedent has potential implications for all market participants. The proposed amendment from the Japanese FSA would serve to protect investors from such an eventuality.