Japan to tighten crypto lending rules as regulator backs bank stablecoin pilot

Dunamu reports Q3 slump amid interest rate hikes and economic slowdownDunamu, the operator of South Korea’s largest cryptocurrency exchange Upbit, posted a lackluster performance in this year’s Q3 due to a decrease in trading volume caused by ongoing interest rate hikes and an economic downturn.Photo by Алекс Арцибашев on UnsplashLagging performanceAccording to the Financial Supervisory Service (FSS), Dunamu’s consolidated operating revenue in Q3 was KRW 193 billion (approximately $150 million), marking a 29% decrease from the same period a year earlier (KRW 271.9 billion). Operating income came in at KRW 101.8 billion, and net profit was KRW 29.5 billion, down 39.6% and 81.6% from the same period last year, respectively.This underwhelming financial performance reflects the sluggish crypto market amid the nation’s economic downturn and the U.S. Federal Reserve’s interest rate hikes. The decrease in the exchange’s net profit in particular can be attributed to a loss in the valuation of crypto assets due to crypto price declines compared to the previous quarter.Positive outlookHowever, with the expected approval of the spot bitcoin exchange-traded fund (ETF) next year and the next Bitcoin halving, the market outlook is expected to improve gradually. Despite the current market conditions, Dunamu plans to continuously promote the mainstream adoption of blockchain services and explore new business ventures.“We will make efforts to revitalize the blockchain ecosystem and create an advanced investment environment,” Dunamu said. “We will strive to offer innovative services building on our unique technological capabilities.”

Many commentators in the crypto space were pointing to a lowering of interest rates last week by the Federal Reserve in the United States as being a positive development for the pricing of digital assets. However, the introduction of a stimulus package to revive the Chinese economy may also have a role to play. Stimulus packageBloomberg reported on Sept. 24 that People’s Bank of China Governor Pan Gongsheng had cut a key short-term interest rate. Furthermore, the Bank of China governor plans to implement a reduction in the reserve requirements that are applied to the country’s banks. The Reserve Requirement Ration (RRR) will be cut by 50 basis points, which will mean that $142 billion will be freed up for new lending.  Additionally, a package of measures has been introduced to rejuvenate China’s beleaguered real estate market, lowering the borrowing costs related to $5.3 trillion in mortgages.Photo by Eric Prouzet on UnsplashBullish for crypto?Jamie Coutts, chief crypto analyst at financial research platform Real Vision, took to X to comment on the development. Coutts wrote: “The bottom is in for global central bank liquidity for this cycle. Sit back and watch the other CBs fall into line. In a credit-based fiat fractional reserve system, debasement is a feature, not a bug.” Coutts signed off with a “Bitcoin” hashtag, with the inference that the development will have positive implications for Bitcoin. Similarly, market analysts at Singaporean crypto-asset trading firm QCP Capital perceive the move as being bullish for crypto and risk assets more generally. QCP Capital analysts stated: "We believe more easing is coming from the People's Bank of China (PBoC), and they have communicated as much, and combined with the U.S. Federal Reserve joining the global cutting cycle, all major central banks, except Bank of Japan, are now ready to inject more liquidity into the market. The macro space continues to look more and more bullish for risk assets, including crypto."  Taking that consideration further, the QCP Capital analysts suggest that market participants in the crypto space may be caught off guard by a resultant uptick in crypto pricing, stating: "We know how explosive crypto prices can be, and with so many bullish catalysts, we think the next move higher will leave many people surprised and sidelined.” Fed rate cutsMany market commentators were similarly enthused last week following an announcement in the U.S. by Jerome Powell, Federal Reserve Chairman, of a 50 basis point rate cut, with the suggestion that further cuts may be implemented going forward. However, not all market pundits are of the same view. Some believe that small interest rate cuts occurring in an overall high rates environment won’t move the needle and that it’s only in a zero rates environment where Bitcoin and crypto skyrocket.  Arthur Hayes, co-founder of BitMEX and Chief Investment Officer (CIO) at the Maelstrom Fund, asserted in his keynote speech at TOKEN2049 in Singapore last week that he wasn’t enthusiastic about rate cuts driving crypto.  “While I think a lot of people are looking forward to a rate cut, meaning that they think the stock market and other things are going to pump up the jam, I think the markets are going to collapse a few days after the Fed’s rates,” he stated. Markets didn’t collapse subsequently although it seems that they are responding to this latest monetary stimulus introduced by China.

OKX Enters Final Stages of Securing VASP License in Hong KongSeychelles-headquartered cryptocurrency exchange OKX is on the verge of securing its virtual asset service provider (VASP) license in Hong Kong, with approval expected as early as June 2024.That’s according to Li Zhikai, OKX’s Global Chief Commercial Officer, who, in a recent interview with Infocast, shed light on the exchange’s preparations, including collaborations with banks and other related technological integrations.Photo by Simon Zhu on UnsplashThe Road to a VASP LicenseObtaining a VASP license in Hong Kong is no easy feat. Regulatory requirements impose a 30% cap on investors’ crypto investments, ensuring they do not risk more than one-third of their net income.Furthermore, the Hong Kong regulator has implemented stringent crypto asset storage protocols, mandating that crypto exchanges securely store 98% of their crypto assets in cold wallets. Additionally, they must provide insurance and compensation arrangements to protect clients’ interests.Cost has been another issue. In June it emerged that Web3 businesses have been shelling out anywhere between 20 million and 200 million Hong Kong dollars ($2.55 million and $25.5 million) in order to see out the licensing application process.Alongside these licensing difficulties, Hong Kong’s Securities and Futures Commission (SFC) issued a warning last month aimed at unregistered crypto businesses engaging in “improper practices” within the Chinese autonomous territory.OKX’s remarkable growthWith OKX having reported growth within the Hong Kong market earlier this year, pointing to the onboarding of over 10,000 new users in just one month, it’s likely that licensing is both worthwhile and necessary for the firm despite the difficulties in obtaining it. In March the exchange established OKX Hong Kong, a local entity, with the primary objective of securing a VASP license and operating as a virtual asset trading platform within the city.Hong Kong’s decision to open its doors to retail investors as of June 1 generated significant interest, with more than 80 foreign and Mainland China-based crypto companies expressing their intent to establish a presence in Hong Kong and obtain local licenses. Among these firms are Gate.io, Huobi, CoinEx, and Interactive Brokers.Expanding global reachNotably, OKX has been actively acquiring licenses in various jurisdictions worldwide as part of its strategic expansion plan. The exchange secured a Minimal Viable Product (MVP) license from the Dubai Virtual Assets Regulatory Authority (VARA) in June. This licensing milestone followed the establishment of a new office at the Dubai World Trade Center by OKX.Before venturing into the Middle East, OKX took steps to obtain a French digital asset service provider (DASP) license in May, aiming to position France as its regional hub in Europe. To facilitate this, OKX established a local subsidiary, OKX France. The application and registration process with the French regulator is expected to enable OKX to operate in full compliance with European regulations.Hong Kong embarked on its journey to become a crypto-friendly jurisdiction over the course of the past 12 months, but particularly so when it unveiled its licensing framework for cryptocurrency exchanges catering to retail customers earlier this year. However, only a handful of platforms, such as HashKey and OSL, managed to secure licenses for offering retail crypto trading services. Others, including Huobi and Gate.io, are still awaiting that regulatory nod.