Crypto enthusiasm prevails in China despite crypto trading prohibition

Artifact Labs Raises $3.25MArtifact Labs, a Hong Kong-based start-up company that concerns itself with Web3 and metaverse products from leading brands, has raised $3.25 million in a recent funding round.Photo by Pixabay on PexelsThe NFT-focused company, which was spun out of Hong Kong’s South China Morning Post (SCMP) in 2022, has received funding from Blue Pool Capital and Animoca Ventures, with Blue Pool leading the funding round. Blue Pool Capital is the investment vehicle of Alibaba founders Jack Ma and Joe Tsai.The company was borne out of a decision taken by the SCMP in 2021 to launch an NFT standard called artifact, which was geared toward recording historical data. Its starting point in that endeavor was the sale of NFTs of its very own historical front pages. That included iconic historical snapshots such as the return of Hong Kong to the Chinese in 1997, the outbreak of avian flu, the onset of the Asian financial crisis and the death of the UK's Princess Diana in 1997.Expansion of operationsArtifact Labs has said that it intends to use the funding to expand company operations. Executing on that, the firm intends to fill multiple developer positions.Phillip Pon, CEO of Artifact Labs commented on the development via a press release:“It’s not about creating new IPs for speculation — for example NFT hype projects — it’s about driving new engagement with historically significant collections by using Web3. We want to carve new space in the younger public’s consciousness for historical brands and artifacts, while supporting these important organizations with new revenue streams to fund their preservation work, we are also solidifying immutable on-chain data preservation through NFTs.”It appears that the firm will release NFT collections on behalf of preservation organizations, while at the same time developing technology to assist institutions in preserving their archives on the blockchain.NFTs with inherent valueLast year, Artifact Labs Founder and former CEO of the SCMP, Gary Liu, said in an interview that NFTs need to contain a certain inherent value beyond just being endorsed by a number of people. Liu stated: “There has to be intrinsic value in the asset itself or the underlying asset that it represents. That’s what is going to drive NFT innovation.”That philosophy is borne out by one of Artifact’s recent collaborations. In February, the firm partnered with RMS Titanic, Inc, a company that’s dedicated to preserving the legacy of the infamous sunken ship. Central to the partnership was an intention to mint NFTs based upon over 5,500 artifacts that have been recovered from the sunken wreckage.In January Artifact Labs partnered with Dubai-based data intelligence and marketing technology firm, MEmob+. The objective of the firms in teaming up is to have the complete range of expertise necessary between them in order to offer brands and companies a strategic advisory service when it comes to delving into the metaverse. Artifact’s art platform Materia, will be harnessed by MEmob+ to assist brands who want to develop art projects in the metaverse.

Taiwan’s FSC to Release Cryptocurrency Guidelines for Banks in SeptemberHuang Tien-Mu, Chairman of the Taiwanese Financial Supervisory Commission (FSC), said at the Legislative Yuan that regulatory guidelines for banks concerning cryptocurrencies will be available in September, as reported by local blockchain media Blocktempo.© Pexels/ Timo VolzHuang’s remarks were in response to questions from Legislator Lee Guei-min about crypto-related issues.Legislator’s three concernsLee raised three concerns: the accessibility of DBS Digital Exchange, currently operating in Singapore, for Taiwanese users; whether traditional banks should be permitted to provide crypto trading platforms; and investor protection against exchange collapses like the one experienced by FTX.FSC Chairman’s answersHuang stated that the FSC has not received any requests related to DBS Digital Exchange. He mentioned the commission’s concerns about the intrinsic value of cryptocurrencies and their ongoing work on regulatory guidelines, set for release in September. Huang also highlighted the importance of financial authorities overseeing crypto trading platforms, citing FTX Japan as an example, where users are protected under Japanese regulations.To safeguard investors from potential collapses, Huang suggested separating assets between hot and cold wallets. Furthermore, he noted that the FSC is not considering allowing the 27 crypto trading platforms registered with the commission to be listed on Taiwanese stock exchanges.

The Need to Distinguish Between Security and Non-Security Virtual AssetsWith the recent enactment of the Virtual Asset User Protection Bill in South Korea, there is a need to lay out criteria for determining whether virtual assets qualify as securities, says Kim Ja-bong, a senior research fellow at the Korea Institute of Finance, in his report titled “The Implications of Determining Which Virtual Assets Constitute Securities and Investor Protection” released on Saturday.Photo by Shubham Dhage on UnsplashThe implications of the Virtual Asset User Protection ActThe Virtual Asset User Protection Act — which will take effect in July of next year — aims to protect customer assets, establish regulations against unfair trading practices, and enforce penalties. Notably, it will target virtual assets that are not securities, deeming it necessary for regulators to determine if virtual assets qualify as securities or not in order to enforce the bill. Assets with characteristics of securities will fall under the jurisdiction of the Capital Markets Act.Therefore, if the Virtual Asset User Protection Act does not provide sufficient investor protection, issuers may be incentivized to issue non-security assets rather than security assets to avoid the regulations of the Capital Markets Act. This further necessitates the act of distinguishing between virtual assets that are securities versus those that are not.Determining if a virtual asset is a security or notThere are two approaches to do this, according to Kim: the passive approach, which avoids considering a virtual asset as a security whenever possible, and the active approach, which treats a virtual asset as a security whenever applicable.He argues that it is better to focus on whether an investment contract qualifies as a security if it is considered an investment contract, rather than simply selecting a specific approach.Furthermore, the nature of virtual assets renders them unbound by national borders, so it is necessary to establish assessment criteria that correspond with international standards, such as those used in the US and Europe.This is especially important because if the criteria differ from international standards, there is a risk of domestic investors suffering damages due to an issuer’s pursuit of regulatory arbitrage between countries.Equitable recognition and potential for security tokensAccording to Kim, the importance of determining whether virtual assets are securities lies in ensuring that security tokens receive the same recognition and trading treatment as traditional securities such as stocks. With such a measure, security token offerings can serve as an efficient and reliable method for raising funds. Although there may be concerns that such a regulation may hinder the development of virtual assets, it may well be an opportunity for security tokens to be qualified and trusted as high-quality financial instruments just like existing securities, Kim claims.Even for virtual assets that are not considered securities, there are many types of assets that are financial in nature, such as e-money tokens — therefore, it is necessary to actively protect investors in non-security virtual assets through financial regulations such as reinforcing disclosure obligations, which is being done in the EU through the Markets in Crypto-Assets Regulation (MiCA).Empowering regulators for enhanced investor protection and market integrityKim underscored that investor protection and healthy growth of the virtual asset market are made possible mainly through expanding regulators’ authority to protect economic interests and prevent damages. The author also suggested institutional reforms that grant regulators substantial authority, which would enhance their ability to protect investors effectively and provide compensation for damages.He added that regulators should also have the authority to enforce liability for damages or impose civil penalties for unfair trading practices conducted using classified information.