Chinese tech groups pause Hong Kong stablecoin plans amid regulatory scrutiny

Dunamu’s Q1 Revenue Drops 28.6% Amid Global Liquidity ContractionDunamu, the operator of Upbit, a major cryptocurrency exchange in South Korea, announced today the release of its Q1 2023 report.Photo by Tiger Lily on PexelsDeclining revenueAccording to the Data Analysis, Retrieval and Transfer System (DART) of the Financial Supervisory Service (FSS), Dunamu’s consolidated sales revenue for the first quarter of 2023 was 304.8 billion KRW ($231.3 million). This figure represents a 28.6% decrease from 426.8 billion KRW ($323.9 million) recorded during the same period last year. Additionally, its operating income declined by 26.3% to 211.9 billion KRW ($160.8 million) from 287.8 billion KRW ($218.4 million). However, its net income showed an increase of 54.9%, reaching 326.3 billion KRW ($247.6 million).Global liquidity contractionDunamu attributed the decline in revenue to several factors, including the ongoing global liquidity contraction, economic downturn, and reduced investor confidence. These factors collectively impacted the company’s financial performance during the first quarter of 2023. On a positive note, Dunamu linked the net income increase to the recovery and upward movement of digital asset prices in comparison to the previous quarter.Established in April 2012, Dunamu has enjoyed noticeable growth by offering a range of services related to digital assets, securities, and asset management. In recent years, it has been tapping into new technology trends like non-fungible tokens (NFTs) and metaverses to adapt to the era of Web3 and enhancing transaction security and convenience for valuable assets.As a company with a shareholder base exceeding 500, Dunamu has been disclosing its business reports as well as quarterly and semiannual reports since 2022 in line with the Korean Capital Markets Act’s requirements.

The Monetary Authority of Singapore (MAS), the city-state’s central bank and primary financial regulator, has set a deadline of June 30 for unlicensed digital token service providers (DTSPs) working out of Singapore to cease offering their services to clients in overseas markets.Photo by Hu Chen on UnsplashResponding to feedbackThe deadline emerged by way of a process MAS has followed as part of the Financial Services and Markets Act 2022 (FSM Act). Last October, the regulator invited feedback from stakeholders related to the authority’s approach to the regulation of DTSPs. MAS published its response to that feedback on May 30.  It stated:”DTSPs which are subject to a licensing requirement under section 137 of the FSM Act must suspend or cease carrying on a business of providing DT services outside Singapore by 30 June 2025.” It added that it was not including any transitional arrangement for DTSPs despite MAS receiving such a suggestion from a number of feedback respondents. Instead, unlicensed DTSPs will need to abide by the June 30 deadline and have acquired a license by then or cease unlicensed activity.The regulator defines DTSPs as individuals, partnerships or Singapore corporations operating from a place of business in Singapore, including those formed or incorporated in Singapore who offer digital token services outside Singapore. Those found in breach of the regulation could face up to three years in prison and fines of up to S$250,000 ($195,000). Companies who have already obtained licensing or those exempted by way of the Securities and Futures Act, Payment Services Act and the Financial Advisers Act are free to continue trading. Challenging licensing requirementsThose who wish to become compliant will have to satisfy some challenging requirements. For those granted a license, an annual license fee of S$10,000 ($7,780) applies. Small-scale DTSPs need to satisfy a $150,000 ($116,670) ongoing capital requirement, while larger, well-established DTSPs must comply with a S$250,000 ($195,000) capital requirement. Additionally, MAS has put in place competency requirements related to a DTSP's CEO, directors, partners and managers. Hagen Rooke, a partner at law firm Gibson, Dunn & Crutcher, outlined on LinkedIn that while it's possible for unlicensed operators to obtain licensing, it will be very difficult to get a license. In its feedback response document, the regulator stated: “MAS will approach the licensing of DTSPs in a prudent and cautious manner and there will be extremely limited circumstances under which MAS will consider granting an applicant a licence under section 138 of the FSM Act.” Rooke advised crypto companies that may be affected to act swiftly in order to derisk through an operational restructuring or removing the businesses' Singapore touchpoints. He suggested that firms need to consider if it has customers outside of Singapore or front-office functions located outside of the city-state to determine if they could be affected by this regulatory measure. A number of Asian countries have moved to take action against unlicensed foreign firms that have engaged with local investors, with Thailand becoming the latest country to do so recently. However, the Singaporean authorities have approached the issue from the opposite perspective, citing the potential reputational risk that unlicensed DTSPs pose for Singapore.

Korea to introduce more effective guidelines for crypto listing and delistingThe South Korean cryptocurrency industry is expected to see standardized guidelines for listing and delisting cryptocurrencies on trading platforms by the first half of next year, according to a report by local news outlet ETnews. This move is a response to the current self-regulatory guidelines among cryptocurrency exchanges, which have been found inadequate in effectively managing the listing and delisting of digital currencies.Photo by Mathew Schwartz on UnsplashA dedicated task forceThe Financial Supervisory Service (FSS) in South Korea has reportedly initiated a task force dedicated to creating standardized rules and regulations for cryptocurrency listing and delisting. This team includes both government officials and experts from the private sector.An official from the FSS noted that the task force is aiming to present the final version of the guidelines to the National Assembly before the implementation of the Virtual Asset User Protection Act in July of next year. Operating under the oversight of the financial regulator, these standardized guidelines are expected to enhance their effectiveness and aid crypto businesses in maintaining self-regulation.Frequent listing and delistingThe decision by the Korean financial authorities to formulate these guidelines was prompted by the frequent listing and delisting of cryptocurrencies on trading platforms, which pose risks and cause confusion for customers. An earlier report from the Financial Services Commission’s Financial Intelligence Unit (FIU) highlighted that the number of tokens listed in the first half of 2023 increased to 169, up from 95 in the first half of 2022, while the number of delisted tokens rose from 78 to 115.The WEMIX controversyThe cycle of listing, delisting, and relisting cryptocurrencies has sparked controversies, with WEMIX serving as a notable example. WEMIX is the native token of blockchain gaming company Wemade’s Wemix blockchain network. In December, WEMIX was collectively delisted by the Digital Asset eXchange Alliance (DAXA), which includes South Korea’s top five crypto exchanges: Upbit, Bithumb, Coinone, Korbit, and Gopax. The reason cited was Wemade’s breach of disclosure rules regarding token distribution.However, in a turn of events, Coinone relisted WEMIX on its platform in February this year. Following this, DAXA established self-regulatory guidelines concerning the relisting of tokens. Despite these guidelines, Gopax also proceeded to relist WEMIX earlier this month. As a result of this move, DAXA criticized Gopax for not complying with the self-regulatory guidelines. Gopax faced a restriction on its voting rights within the alliance for three months, and a cautionary note was issued against them.An industry insider noted that despite the efforts of DAXA, their self-regulation measures for cryptocurrency trading services, including the listing process, have not been particularly effective. However, the upcoming rules are expected to be more impactful as they will be in line with the forthcoming Virtual Asset User Protection Act.