Bank of Korea Conducts Successful CBDC Pilot Test with Financial Institutions

On Monday, Hong Kong's spot Bitcoin exchange-traded funds (ETFs) marked their first cumulative daily Bitcoin outflows, with the sole occurrence arising from China Asset Management's (ChinaAMC) ETF. ChinaAMC's spot Bitcoin ETF witnessed an outflow of 75.36 Bitcoin, while the other two ETFs reported zero inflows. This development comes after these ETFs debuted on the Hong Kong Stock Exchange on April 30.Photo by Kanchanara on UnsplashInsights into daily trading dynamics and metricsOn their inaugural trading day, the three funds garnered an inflow of 3,910 BTC, as per data from SoSo Value. However, it's important to note that shares acquired through in-kind subscriptions of physical Bitcoin are not counted as U.S. dollar-based cash flows in SoSo Value's daily net inflow statistics. Instead, SoSo Value employs the Bitcoin-inflow metric, measuring the actual flow of Bitcoin into or out of all ETFs on a given trading day. As of Monday, the combined holdings of the three ETFs stood at approximately 4,150 Bitcoin, with total net assets reaching $266.8 million from $247.7 million on the debut day, according to SoSo Value data. Farside Investors' data corroborated similar findings, indicating an outflow of $4.9 million from ChinaAMC's spot Bitcoin ETF on Monday, while the other two ETFs saw no inflows. Trading volume and market activityDespite the outflows, the total trading volume for the three ETFs surged to $8.6 million on Monday, up from $8.01 million the previous Friday, according to SoSo Value data. Meanwhile, in contrast, spot Bitcoin ETFs in the United States witnessed a net inflow of $217.06 million on the same day, with Grayscale's GBTC fund registering its second consecutive daily net inflow.

Regulatory Caution Among Asian Nations Amid Reports of Illicit FinancingWith a plethora of reports of crypto-related terrorist financing having been published in recent weeks, it’s understood that Asian nations may be looking to exercise caution when it comes to the current ongoing process of establishing regulatory guidelines for crypto.That’s according to a report published by the South China Morning Post (SCMP) on Thursday. The use of cryptocurrency by Hamas to fund its attack on Israel is being seen as the catalyst that may drive authorities in various Asian nations to take a more cautious approach to regulating digital currencies, according to analysts cited by the publication.Raj Kapoor, the founder of India Blockchain Alliance (IBA), commented on these recent developments, stating:”It is a kick on the backside for most governments. All regulatory bodies will take a closer look at crypto regulation. Governments will need to start implementing new rules and regulations.”At the recent G20 summit held in New Delhi, a joint declaration called for the regulation, supervision, and oversight of crypto assets, among other measures. The declaration emphasized the importance of supporting “a coordinated and comprehensive policy and regulatory framework.”Kapoor stressed the importance of revisiting the declaration and developing solutions to implement its objectives.Photo by Adolfo Félix on UnsplashRenewed scrutinyEvents in Palestine in recent weeks have led to renewed scrutiny when it comes to monitoring illicit financing activity via cryptocurrency. Only days following the recent Hamas attack, Israeli authorities moved to freeze specified crypto accounts.That scrutiny has continued in recent days, with more accounts having been frozen on crypto platforms such as Binance, while more still have been identified as suspicious, with requests for further information having been submitted in respect of over 200 additional accounts.On Wednesday it emerged that the United States Treasury’s Office of Foreign Assets Control (OFAC) had sanctioned a Gaza-based crypto platform.Potential over-reactionWhile crypto-related terrorist financing has been widely publicized, blockchain analytics firm Chainalysis warned on Wednesday that crypto’s role in this illicit activity has likely been overstated. In its blog post on the subject, the firm stated:“Although terrorism financing is a very small portion of the already very small portion of cryptocurrency transaction volume that is illicit, some terrorist organizations raise, store, and transfer funds using cryptocurrency.”Additionally, Chainalysis stated that it had seen “overstated metrics and flawed analyses of these terrorist groups’ use of cryptocurrency.” Peter Van Valkenburgh, Director of Research at non-profit crypto advocacy group Coin Center, also believes that reporting on the matter is not balanced. Taking to X, he stated:“Sensational early reporting on the scale of Hamas crypto fundraising significantly misstated the amounts involved.”Coin Center’s Director of Communications, Neeraj Agrawal, highlighted an article which claimed that crypto “fueled Hamas’ terror attack on Israel” in its title, only to reveal within the body of the article that “cryptocurrency is still far from the largest funding source for terrorism.”Anndy Lian, a Singapore-based author and inter-governmental blockchain adviser, noted that while some countries may consider banning cryptocurrencies as a solution, this could merely drive illicit financing underground and make it more challenging to trace and halt. Lian argued that cryptocurrencies are traceable and trackable, unlike traditional fiat currencies like US dollars.

MHC Digital Group, an Australian digital assets management platform, has entered into a partnership with USDC stablecoin issuer Circle Internet Financial, with a view towards increasing the circulation of USDC within Australia and the Asia-Pacific (APAC) region. MHC was founded by well-known venture investor Mark Carnegie, with the company having offices in Sydney and Singapore. The firm will work with Circle to distribute USDC in Australia and within the APAC region. MHC has been marketing its services towards institutional investors and it’s that same client group that the two firms want to target in order to increase USDC circulation. The firm will provide “cost-effective and efficient USDC access” where institutional clients are concerned.Photo by Catarina Sousa on PexelsCrypto ‘a better mousetrap’ In a media release published on behalf of the two companies, Carnegie claimed that while many people still claim that there is no use case for crypto, hundreds of billions move globally at a fraction of the cost experienced via the traditional financial system. “Crypto is simply a better mouse trap for the vast majority of international payments,” he added. Commenting on the development in an interview with the Australian Financial Review, Carnegie stated:“I’m hoping we can show there are hundreds of millions of dollars of forex [foreign exchange] trading fees, where super funds are getting their faces ripped off by Macquarie Bank and the other incumbent banks.” Appealing to pension funds Carnegie wants to get large pension funds on board in using USDC. He pointed to the fact that global banks make $170 billion from corporations and individual investors through the movement of funds over the SWIFT network. He can see that major savings can be made if USDC is used relative to these fees. Despite all this, Carnegie acknowledges that it will be a hard sell to get them on board. As part of these plans, MHC Digital will be launching an over-the-counter (OTC) trading desk, which will be targeted towards hedge funds, crypto enterprises and high-net-worth individuals. APAC opportunity Kash Razzaghi, Circle’s chief business officer (CBO), identified APAC as presenting with an adoption opportunity beyond institutional clients. Razzaghi stated: “With its young, mobile-first and digital wallet-ready population, the Asia Pacific region is ahead of the curve when it comes to digital asset adoption." Carnegie appears to be similarly enthusiastic when it comes to the APAC region. In an interview with CNBC back in January, he suggested that the crypto bull run was “an Asian story this time round.” It’s understood that the two companies are also considering collaborating on the issuance and distribution of an Australian dollar (AUD) denominated stablecoin. This development is the latest in a string of initiatives taken by Circle to bring about USDC adoption in the APAC region. In 2023 the company partnered with SBI Holdings with the objective of enhancing the circulation of USDC within the Japanese market. The very same rationale resulted in it partnering with Tokyo-based crypto trading platform Coincheck in February 2024. The company has also tried to trigger adoption at a retail level, through collaborations with FamilyMart convenience stores in Taiwan and Southeast Asian super app Grab.