Korean retail traders flee crypto as stocks rally amid regulatory debate

Hong Kong regulator, the Securities and Futures Commission (SFC), which oversees Hong Kong’s securities and futures markets, is understood to be planning to give the go-ahead for crypto derivative products to be offered to professional investors within the Chinese autonomous territory. Chinese English-language newspaper China Daily reported on June 4 that the proposed move forms part of Hong Kong’s efforts to expand its digital assets-related product offering in order to further bolster its position as a leading regional hub for the sector. Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, told the publication that the SFC will open up crypto derivatives trading to professional investors in the city “in an orderly, transparent and secure manner.”Photo by Florian Wehde on UnsplashBoosting liquidity to spot marketsChina Daily claimed that the SFC outlined that the crypto derivatives product will enable efficient risk transfers, while boosting the liquidity of the underlying spot markets. TokenInsight data suggests that the global crypto derivatives market has reached $21 trillion in trading volume over the course of Q1 2025. By comparison, derivatives trading dwarfs spot trading, given that spot trading weighed in at just $4.6 trillion over the same period. Liquidity in the underlying spot markets can be enhanced by a broadening of crypto derivatives product offerings in instances where digital assets are traded for immediate payment and delivery. Their availability will also appeal to professional traders and investors who need access to derivatives as part of their overall strategies in order to hedge positions and add leverage when required. Industry interestReaction to news of the Hong Kong SFC’s plans has largely been positive. Back in February, Jean-David Péquignot, chief commercial officer (CCO) with the world’s largest crypto derivatives exchange Deribit, told the South China Morning Post that opening up availability of crypto derivatives products was the one item missing from Hong Kong’s push towards development as a hub for the digital assets sector. At the time, he stated:“Hong Kong is this central financial hub in the world and a big one in Asia. If regulators can solve the derivatives piece, it is a place where we love to be.” On that basis, Péquignot suggested that Deribit, headquartered in Dubai, would be interested in establishing itself in Hong Kong, suggesting that “Asia is a big market for derivatives.” He added:“We want to be in Asia. We just need to find the right place and time to engage with regulators and get a regulatory framework to work with.” The company’s acquisition by Coinbase was announced last month for $2.9 billion. Regulatory approach questionedWhile many see the move towards the approval of crypto derivatives in Hong Kong as bullish, not everyone perceives the regulator’s approach in this instance to be positive. Pseudonymous crypto trader “Pickle Cat” outlined on X that “opening crypto derivatives only to 'professional investors' isn’t progress.”  The trader points out that good regulation would concentrate on controlling issuance and not circulation. Suggesting that the SFC has missed the point in its approach, the trader claims that the regulator would serve the crypto derivatives market best by verifying what backs such products while not restricting how such tokens move. 

Seoul Auction Blue seeks to register security tokens with the FSS for Andy Warhol’s artworkSeoul Auction Blue, the operator of fractional artwork investment platform Sotwo, recently submitted an application to the South Korean Financial Supervisory Service (FSS), local news outlet Seoul Economic Daily reported on Wednesday (local time). Its aim is to register security tokens linked to artworks with the financial authority, marking it the third entity in the country to pursue this innovative financial venture.Photo by Guido Coppa on UnsplashAndy Warhol’s ‘Dollar Sign’The artwork investment app plans to issue security tokens based on Andy Warhol’s “Dollar Sign,” a piece measuring 51.0 cm in height and 40.5 cm in length. This artwork was purchased by Seoul Auction Blue at an auction for KRW 626.2 million (approximately $485,000). The total value of the security tokens, inclusive of issuance costs, is approximately KRW 700 million. The firm will issue a total of 7,000 tokens, each valued at KRW 100,000. Upon receiving regulatory approval, Seoul Auction Blue is set to open for subscription requests from Dec. 20 to 26.In its endeavor to issue digital investment contract securities, Seoul Auction Blue has meticulously prepared its documentation in line with the FSS’s guidelines. The selection of the artwork of Andy Warhol, the renowned and iconic 20th-century artist, aligns with the FSS’s recommendation to choose a significant piece by an internationally acclaimed artist. This strategic choice reflects the company’s commitment to compliance and the recognition of Warhol’s global stature in the art world.Preventing conflicts of interestThe registration application submitted by Seoul Auction Blue includes specific restrictions aimed at preventing conflicts of interest with its affiliates related to security tokens. As per these rules, the company is barred from buying idle assets of affiliates to back its security tokens. Instead, Seoul Auction Blue is permitted to acquire them only through public methods like participating in an open bid or a post-sale bid process. Notably, the token issuer is in principle prohibited from purchasing these assets via intermediaries in private sales or any other non-transparent settings.The acquisition of underlying assets requires approval from the compliance monitoring committee. Furthermore, this regulation strips Seoul Auction Blue of the capacity to determine the final trading prices or conditions for these transactions.In addition, the company is collaborating with a couple of securities firms to safeguard investors’ funds, creating a buffer against any potential bankruptcy of the issuer. The funds raised from subscriptions for the security tokens will be managed in accounts overseen by KB Securities. Additionally, an investor protection fund is being set up, which will be handled as a trust fund by Shinhan Securities. This fund acts as an extra layer of security, offering investors enhanced protection for their investments.

Japan’s ODX to commence digital securities trading in DecemberOsaka Digital Exchange (ODX) is set to commence security token trading with Ichigo’s real estate assets, marking yet another milestone in Japan’s evolving digital asset landscape.Photo by note thanun on UnsplashDecember 25 ‘START’ODX’s Proprietary Trading System (PTS), named “START,” is scheduled to commence operations on Dec. 25, as announced in a Nov. 20 statement. This development follows the approval from Japan’s Financial Service Agency (FSA) on Nov. 16 for ODX’s securities token proprietary trading system.A security token, essentially a digitized version of traditional securities, represents fractional ownership in real-world assets like equity, real estate, or company shares. ODX’s trading system aims to enhance liquidity and funding opportunities for securities token operations within the region, aligning with its broader vision of establishing a digital stock exchange to rival the Tokyo Stock Exchange.Established in 2021 by SBI Holdings and Sumitomo Mitsui Financial Group (SMFG), ODX is poised to welcome Ichigo as its inaugural client on the START platform. Ichigo is a Japanese sustainable infrastructure firm based in Tokyo. Real estate is one of the sectors it is involved in, where it specializes in the renovation and improvement of existing buildings.Third security token launchThe real estate company has previously issued two security tokens and now plans to issue a new token, facilitating real estate investment opportunities for individuals. A company statement reveals that the new security token will invest in six strategically located rental residential properties with superior access to the city center. Bloomberg reported on Monday that Ichigo intends to sell approximately $20 million worth of securities backed by property investments, with trading set to commence on Dec. 25.The release of real estate-backed security assets will take place on Progmat, a Japan-regulated digital asset platform established in 2022 by Mitsubishi UFJ Financial Group (MUFG) in collaboration with other Japanese banks. Progmat integrates blockchain technology with financial expertise to manage digital assets within the regulatory framework of Japan.As a consequence, MUFG will effectively be acting as custodian and security token issuer as part of this security token offering. SBI Securities will act as the lead underwriter of the project.Security tokens, subject to federal regulations, derive their value from external tradable assets and represent ownership in an enterprise or asset. The introduction of security token trading on ODX has the potential to enhance liquidity and streamline the investment process for individuals. However, with the initial offering of $20 million in securities, it is evident that Japan is cautiously exploring the demand for alternative forms of securities.SBI portfolio companyInitially, Japanese financial services conglomerate SBI Holdings had a 70% stake in ODX, with SMFG holding a 20% equity stake. Investment Bank Daiwa Securities and global financial services group Nomura made up the balance, with each having a 5% equity holding in the business.Those equity stakes have most likely been diluted as in September ODX confirmed that it had accepted equity participation from the Chicago Board Options Exchange (CBOE), the largest U.S. options exchange platform, private equity firm Virtu Investments and proprietary trading firm and global market maker Optiver Principal Strategic Investments (PSI).