Korean Financial Watchdog to Penalize Bankers Involved in Illegal Foreign Remittances

OSL Parent Company Denies Sale PlansBC Technology Group, a Hong Kong-based investment holding company, has firmly denied recent reports suggesting it is exploring the sale of its licensed digital asset business, OSL, for up to HK$1 billion (US$137.3 million).Photo by Nextvoyage on PexelsCompany stock plummetsThis comes in response to a report that emerged via Bloomberg on Monday. The news of the possible sale had a significant impact on the company’s stock, which plummeted by over 22% to HK$3.35 the following day.BC Technology Group, which has been listed on the Hong Kong stock exchange since 2012, is the parent company of OSL. The reports hinted at the possibility of selling off parts of the business, citing undisclosed sources.In response to these rumors, BC Technology Group issued a formal statement to clarify the situation, deeming the article “factually inaccurate and highly misleading.” It vehemently refuted any intention to sell OSL, a key player in the cryptocurrency exchange sector.First licensed exchangeOSL was the first cryptocurrency exchange to be licensed by the Securities and Futures Commission (SFC) in Hong Kong in 2020, initially operated under a voluntary scheme and was limited to serving professional investors. However, the recent licensing requirement broadened its scope, allowing it to cater to retail investors as well, including popular cryptocurrencies like Bitcoin and Ethereum.Both OSL and HashKey had their licenses upgraded this year, enabling them to serve retail investors as per the new policy. However, the reception to this new regulatory framework has been somewhat lukewarm, with only five local exchanges applying for the new virtual asset trading platform (VATP) license. The SFC had to publish a list of applicants following a financial scandal involving the JPEX crypto exchange, which led to over 2,500 complaints and losses totaling approximately HK$1.5 billion.The backdrop of this unfolding situation is Hong Kong’s efforts to establish itself as a significant virtual asset hub. The city announced its ambition to transform into a hub for digital assets a year ago, drawing considerable attention from cryptocurrency exchanges. These efforts included implementing new regulations in June that mandated licensing for cryptocurrency exchanges.Several companies with connections to Hong Kong and mainland China have expressed their intent to obtain a license, potentially taking advantage of Hong Kong’s favorable stance toward virtual assets when compared to mainland China’s strict regulations.High compliance costsNonetheless, high compliance costs in Hong Kong continue to pose a barrier, potentially preventing the city from becoming the primary base of operations for crypto businesses. Industry insiders estimate that the cost of compliance from start to finish can be as high as HK$60 million for a company. Firms have reported that obtaining a trading license in Hong Kong can involve an outlay of between HK$20 million and HK$200 million.As per BC Technology Group’s mid-year report, the company reported a net loss of HK$94.7 million in the first half of 2023. This marked a notable improvement compared to the HK$312.1 million in losses during the same period the previous year. OSL remains a significant source of income for the company.

Hong Kong’s OSL crypto exchange receives $91M boostBC Technology Group, the owner of the licensed OSL exchange, has secured a HK$710 million ($90.9 million) investment from BGX.Photo by Precondo CA on UnsplashBringing clarity to BitgetX market withdrawalBGX is reportedly associated with Seychelles-incorporated crypto exchange Bitget. The investment, which was announced via statements published by both BC Technology Group and BGX on their respective websites on Tuesday, brings further clarity to the rationale behind Bitget’s recent decision to withdraw its BitgetX platform from the Hong Kong market.BitgetX was believed to be working towards crypto licensing in Hong Kong. Its decision on Monday to stop pursuing a virtual asset trading platform (VATP) license and withdraw from the market entirely had been perceived as a weakness of the regulatory regimen in Hong Kong. However, it now appears that it was just clearing the way for involvement in crypto trading brought about through its investment in OSL, an entity that has already acquired a trading license within the Chinese autonomous territory.BGX has entered into an agreement to acquire a 29.97% stake in BC Technology, OSL's parent company, pending shareholder approval. According to an announcement, BGX CEO Patrick Pan Zhiyong is set to become one of two new executive directors as part of this investment. Pan, concurrently serving as the CEO of BitgetX, will also oversee the transition as Bitget steps back from the market, scheduling its platform closure for Dec. 13.Sale rumors deniedReports emerged in October that BC Technology Group was considering the sale of OSL based on a $128 million valuation. Contrary to those reports, BC Technology vehemently denied any intentions to sell OSL, emphasizing its commitment to maintaining the exchange’s operations. The company dismissed such speculation as “factually inaccurate and highly misleading,” underscoring its dedication to navigating the evolving crypto landscape.Bitget, responding to inquiries from the South China Morning Post (SCMP), asserted its independence from BGX, stating that it is “an independent entity” with no legal or commercial connections to the crypto firm.BGX is incorporated in the Cayman Islands and wholly owned by Liu Shuai, the founder of Shenzhen Qianhai Junchuang Fund Management and Singaporean crypto fund Foresight Ventures. Liu’s investment portfolio includes Bitget, as well as U.S. crypto media group The Block, which was acquired by Foresight Ventures, according to reports earlier this week.The incorporation of BGX into BC Technology’s ecosystem introduces a dynamic player with diverse investments across the crypto space. Against the backdrop of Hong Kong’s changing regulatory landscape, with the introduction of a mandatory licensing scheme last year, BC Technology’s OSL was the first exchange to obtain a voluntary license from the Securities and Futures Commission (SFC) in 2020. The asset management division of the company received a trading license in May of this year. In August, OSL, along with HashKey, received approval from the SFC to upgrade their licenses, allowing them to serve retail investors.The evolving regulatory environment reflects Hong Kong’s ambition to position itself as a crypto hub, attracting both institutional and retail participants. While that endeavor is not without its challenges, the city hasn’t been adversely affected by BitgetX's withdrawal from the market, given this related investment in OSL.

HashKey’s New $100M Fund to Prioritize AltcoinsHashKey Capital, the investment arm of Hong Kong-based crypto firm HashKey Group, is embarking on a new investment journey with the launch of a fund that predominantly targets major altcoins.Photo by Kanchanara on Unsplash50% altcoin allocationIn a recent interview with Reuters, Jupiter Zheng, the Portfolio Manager of the fund, revealed that less than 50% of the fund’s allocation will be directed towards Bitcoin (BTC) and Ethereum (ETH), the two largest cryptocurrencies.The fund has already garnered attention from potential clients, primarily high-net-worth individuals and investment firms catering to affluent, high-net-worth Asian families. Zheng underscored the fund’s commitment to diversifying investment strategies, which he believes is necessary as a consequence of the Hong Kong stock market’s recent weakness.“We see untapped demand from professional investors who wish to chase above-market returns in crypto,” Zheng noted, suggesting that the allure of crypto assets is becoming increasingly appealing to traditional investors.$1 billion assets under managementHashKey Capital has $1 billion in assets under management, and the firm has set an ambitious target of raising $100 million for the newly launched fund within the next 12 months. This allocation strategy also includes a portion of the fund’s holdings in cash, allowing for flexibility in navigating the dynamic and volatile cryptocurrency market.In addition to forging ahead with crypto investments, the company is actively establishing distribution channels with offshore Chinese financial institutions, expanding its reach and influence in the digital asset space.Positive market outlookZheng remains optimistic about the crypto market’s future, expressing confidence that cryptocurrency prices are finding stability as industry liquidity improves. He cited several factors contributing to this stabilization, including the plateauing of US interest rates and the growing interest of large US asset managers in filing for spot Bitcoin ETFs, indicating a maturing and evolving industry sector.Responding to news of the new fund, Ryan Selkis, CEO and Founder of crypto market intelligence firm Messari, said that he expected other funds to follow suit in 2024 given that “there’s a ton of inefficiency and mispricing in assets 50–500 by market cap.”HashKey’s progression in the crypto investment space can be traced back to its acquisition of a Type 9 asset management license from Hong Kong’s Securities and Futures Commission last year. This license granted HashKey the ability to manage portfolios exclusively composed of virtual assets, laying the groundwork for its latest venture. It has since secured Type 1 and Type 7 licenses and recently started offering its products to retail investors in Hong Kong, being one of the first to do so.Funding roundEarlier in the year, the company successfully closed a $500 million investment round for a fund dedicated to infrastructure, tooling, and applications that drive the widespread adoption of blockchain and crypto technologies. In April, it launched a wealth management service in response to demand from investors who were looking to gain exposure to digital assets.Hong Kong’s welcoming stance towards cryptocurrencies and its proactive approach to addressing market demand for alternative assets have played a pivotal role in attracting digital asset firms. The city’s Securities and Futures Commission (SFC) has been granting licenses to crypto exchanges in alignment with its new licensing framework, opening up opportunities for retail investors to trade “large-cap tokens” on licensed platforms while implementing safeguards like knowledge tests, risk profiles, and reasonable exposure limits.