Japan surges to the front of Asia’s crypto pack as policy tailwinds mount

China Furthers Efforts to Shape the MetaverseFindings by US political media outlet POLITICO suggest that Chinese authorities and state-owned companies are seeking to mold the metaverse in line with existing systems in China such as the country’s social credit scoring system.The concept of the metaverse entails a network of interconnected immersive virtual worlds powered by virtual reality, augmented reality, and simulations. Development in this area is centered around applications such as online gaming and virtual events.Photo by Hanson Lu on UnsplashDigital Identity SystemIn a report published on Sunday, POLITICO referenced recently drafted proposals put forward by China Mobile, a state-owned telecoms operator. The proposals outline a “Digital Identity System” for users within online virtual worlds and metaverses.These proposals recommend the use of “natural characteristics” and “social characteristics” within digital IDs, encompassing personal data such as occupation, “identifiable signs,” and other attributes. Moreover, they suggest storing this information “permanently” and sharing it with law enforcement to ensure order and safety within the virtual realm.Setting agreed benchmarks for emerging techThe proposals present a hypothetical scenario involving a disruptive user named Tom, who causes turmoil in the metaverse. The digital identity system, according to these proposals, would facilitate prompt identification and punishment by law enforcement.These discussions are occurring within the framework of the International Telecommunication Union (ITU), a United Nations (UN) agency responsible for establishing global technology standards. This strategy echoes China’s endeavor to set worldwide benchmarks for emerging technologies.The ITU, as a UN agency, holds significant sway in defining global telecommunications and technology infrastructure standards. Given that the US and China have quite different outlooks when it comes to technology governance, particularly the future development of the internet and related technologies, the ITU has become a means through which common ground can be found and differences resolved.Upcoming vote on proposalsChina Mobile’s proposals, presented during the ITU’s metaverse focus group meeting, are poised to be voted on during the next meeting in October in Geneva. The company is the largest mobile operator by subscriber base. Demonstrative of ongoing tensions that exist between the US and China, the company was delisted from the New York Stock Exchange in 2021 following a US executive order.Chinese organizations are reportedly submitting more proposals than their Western counterparts, demonstrating that China is very much taking a lead in metaverse development. It’s evident that there is a clear strategy for China to establish itself in furthering this technology.In May, Alibaba Cloud, a subsidiary of Chinese e-commerce giant Alibaba Group, entered into a partnership with layer one blockchain Avalanche to better enable businesses to deploy metaverses. Around the same time, an administrative body within China’s Henan Province established a $22 million dollar investment fund, focused on financing metaverse-related ventures.Later that month, the city of Zhengzhou announced a set of policy proposals designed to support the growth and development of metaverse companies in the region.Within the Chinese autonomous territory of Hong Kong too, there has been plenty of metaverse-related activity. Metaverse start-up Artifact Labs completed a funding round with a view towards expanding its operations. The city is home to Animoca Brands, a prominent player in metaverse-related development.

Non-Fiat Crypto Exchanges in Korea Urge Banks for Real-Name AccountsThe Virtual Asset Exchange Association (VXA) made an announcement today regarding its recent due diligence request sent to 12 South Korean banks, as reported by local news outlet Digital Today. These banks have not yet entered into contracts to provide real-name deposit and withdrawal accounts to cryptocurrency exchanges.VXA is a group comprised of representatives from ten non-fiat crypto trading platforms in the country. Among its members, eight exchanges–Aprobit, Probit, BTX, Foblgate, GDAC, Flata Exchange, Flybit, and High Block (previously known as Huobi Korea)–participated in the request.Photo by Eduardo Soares on UnsplashPartnerships with banksThe objective of the request is to urge the banks to consider establishing partnerships with competent non-fiat exchanges. The requesters argued that such collaborations would promote fair trading in the market and provide customers with more options. They highlighted the growing presence of the virtual asset trading sector in the capital market.Uneven crypto marketAn official from VXA emphasized the key role played by real-name bank account issuers in creating a healthy environment that addresses the existing monopoly in the Korean crypto market. According to a March report published by the Financial Services Commission, non-fiat crypto trading platforms accounted for only 3 percent of the total Korean crypto market capitalization during the second half of 2022. The remaining 97 percent was attributed to fiat-supporting crypto exchanges.The official further explained that allowing more exchanges to support the trading of the Korean won currency would contribute to shaping a free market while bolstering transparency and investor protection.Legal requirementsEarlier this month, VXA also sought fair due diligence from five Korean banks that have already formed partnerships with fiat-supporting crypto exchanges. In Korea, crypto trading platforms are required by law to obtain real-name accounts from banks in order to provide cash deposit and withdrawal services.

Hong Kong Pressing Banks to Facilitate Crypto ClientsHong Kong’s banking regulator is urging banks, including HSBC and Standard Chartered, to onboard crypto exchanges as clients, despite increasing regulatory scrutiny of the industry in the United States.That’s according to a report published by the Financial Times (FT) on Wednesday. The FT cited three people who it claims are familiar with the matter, together with a letter seen by the publication as the basis for the assertion.Photo by Ansel Lee on PexelsChallenging crypto banking reticenceAt a recent meeting, the Hong Kong Monetary Authority (HKMA) questioned these UK-based lenders, together with the Bank of China, about their reluctance to accept crypto exchanges as customers, according to sources familiar with the matter. The HKMA emphasized that due diligence on potential clients should not create unnecessary burdens, particularly for those seeking opportunities in Hong Kong. While banks do not have a ban on crypto clients, concerns over potential money laundering and illegal activities have made them cautious.The pressure faced by banks highlights the challenges Hong Kong is facing in establishing itself as a global hub for the crypto industry, especially in light of previous high-profile collapses, such as the implosion of FTX. However, the HKMA is encouraging banks to overcome their reservations, as the regulator believes there is resistance from senior executives who adhere to traditional banking mindsets.The enthusiasm of some Hong Kong officials for the sector is evident as pro-Beijing lawmaker Johnny Ng invited Coinbase and other crypto exchanges to set up operations in the city following the recent SEC lawsuit against Binance and Coinbase.Caught between opposing forcesBanks in Hong Kong find themselves walking a fine line between supporting the crypto industry as encouraged by the government and being cautious due to the US regulatory environment. They want to ensure the industry’s development aligns with government policies, but they are also concerned about potential anti-money laundering and know-your-customer issues.The HKMA and the Securities and Futures Commission (SFC) have been vocal about their expectations, setting them apart from regulators in other jurisdictions that may be more skeptical of cryptocurrencies. Last month it emerged that crypto startups are having difficulties in establishing banking facilities in the autonomous Chinese territory. At the time, the HKMA did convene a meeting to bring parties together in order to forge a path forward.While Hong Kong has a history as a crypto center, its position weakened after Beijing’s crackdown on the industry in 2017. However, the Hong Kong government aims to reestablish the city as a hub for digital assets, having expressed its desire to provide a supportive environment for crypto-related businesses. The introduction of a new licensing regime for crypto platforms in Hong Kong is part of the government’s efforts to attract more crypto groups to the city.HSBC, Standard Chartered, and the Bank of China hold influential positions in Hong Kong as issuers of the city’s currency and have key roles in the Hong Kong Association of Banks lobby group. Standard Chartered claims that it maintains regular dialogue with regulators on various subjects, while HSBC has claimed that it is actively engaging in policies and developments within the nascent industry.