Hong Kong Legislator Courting US Crypto Exchange Coinbase

HK Regulators Facilitate Dialogue between Banks and Crypto EnterprisesIn a recent column, Arthur Yuen, Deputy CEO at the Hong Kong Monetary Authority (HKMA), stated that the HKMA and the Securities and Futures Commission (SFC) will jointly convene a meeting on Friday to share opinions on providing banking services to virtual asset service providers (VASPs).Proportionate CDD measuresYuen said that banks should “differentiate the risk levels of customers and apply proportionate CDD [customer due diligence] measures,” and “refrain from adopting a ‘one-size-fits-all’ approach to reject account opening applications.” To address misconceptions about CDD, the HKMA issued a circular on Thursday, offering further clarification and sharing notable cases and best practices.The HKMA called on banks to enhance employee training on account opening procedures and create task forces to help companies seize new business opportunities. The HKMA plans to actively take part in developing and introducing international standards, and provide guidance and support for banks to adopt appropriate anti-money laundering measures.SFC’s guidelines in MayMeanwhile, SFC CEO Julia Leung said in a discussion with Bloomberg that the SFC will issue virtual asset guidelines in May.Reactions on TwitterIn his tweet, Justin Sun, the founder of blockchain DAO ecosystem Tron, hinted at the potential development of a Tron-based stablecoin in Hong Kong. The Hong Kong Innovation Encryption Fund (HKIEF), an investor in blockchain projects, also took to Twitter to predict the details of a regulatory framework for cryptocurrencies in the city.According to HKIEF, USDT and USDC will be classified as security tokens, while BTC and ETH won’t be deemed securities. Exchanges trading non-security tokens will need both a VASP license and a trust license. Hong Kong-based virtual asset exchanges will be required to obtain a full license by May 31, 2024.

Gate.io Threatens Legal Action Against SpeculatorsGate.io, the erstwhile legacy Chinese cryptocurrency exchange currently headquartered in the Cayman Islands, has issued a stern warning to individuals spreading rumors of imminent bankruptcy.The exchange intends to take legal action against those responsible for causing panic among investors by disseminating baseless rumors without any concrete source of information. This announcement, originally written in Turkish, was posted on Gate.io’s official Twitter account on June 4.Photo by Kai Pilger on UnsplashInsolvency rumorsThe insolvency rumors surrounding Gate.io emerged following a series of events involving Multichain, a troubled cross-chain protocol. Multichain has been facing technical difficulties since May 24, when a node issue resulted in transaction delays. Several days later, the Multichain team revealed that they were unable to contact their CEO to access the servers and resolve the problem.These circumstances fueled speculation that the protocol’s leadership had been arrested and that Chinese authorities had seized over $1.5 billion in smart contract funds.On May 24, data from blockchain analytics firm Arkham Intelligence indicated a significant inflow of Multichain tokens ($MULTI) from Gate.io’s platform. In response to mounting concerns, Gate.io categorically denied any liquidity issues on May 31. The exchange asserted that its operations were running smoothly and that withdrawals were not a problem. Despite reports on Twitter and Telegram channels of traders withdrawing funds, Gate.io’s trading volume has remained relatively stable in recent days.As of now, Gate.io’s native token, GateToken ($GT), is trading at $4.01, representing a 18% decline over the past week, according to CoinGecko data. Gate.io, which although headquartered in the Cayman Islands, has recently expanded its presence to Hong Kong, Turkey, and Dubai.Multichain falloutThe ongoing issues faced by Multichain have prompted other cryptocurrency exchanges to take action. Binance, for example, suspended deposits for 10 bridged tokens on the BNB Smart Chain, Fantom, Ethereum, and Avalanche blockchain networks on May 25. Furthermore, transaction downtime compelled the Fantom Foundation to remove 449,740 $MULTI ($2.4 million) from liquidity on the decentralized exchange SushiSwap.Gate.io’s firm denial of insolvency rumors coupled with its threat of legal action underscores the exchange’s determination to combat the spread of this speculation. The exchange is seeking to protect the interests of its investors and maintain the stability of its operations.All stakeholders need to rely on continued vigilance in the crypto space. However, if Gate.io is to be afforded the benefit of the doubt in this instance, then it could be interpreted that it is demonstrating a commitment to transparency and swift action in the face of seemingly baseless rumors. On that basis, the firm’s response could be perceived as a demonstration of its resolve to navigate the challenges presented by the Multichain situation and uphold its reputation as a reliable cryptocurrency exchange.

Singapore’s DBS Bank, the largest bank in Southeast Asia with assets totaling $739 billion, has launched a pilot project that utilizes blockchain technology for the purpose of distributing government grants. According to a report from Fintech News Singapore, the bank has partnered with Enterprise Singapore (EnterpriseSG) and the Singapore Fintech Association (SFA) to establish the pilot program. The objective is to realize greater efficiency, governance and user experience where programmable grant disbursements are concerned, as a direct consequence of bringing blockchain technology into the equation. Purpose-bound money The pilot program relies on the use of a protocol known as purpose-bound money (PBM). A whitepaper relative to PBM was first published in 2023 by the Monetary Authority of Singapore (MAS). In developing the protocol, MAS had collaborated with DBS, alongside Amazon, the International Monetary Fund (IMF), the Bank of Korea, Banca d’Italia and JPMorgan-owned blockchain platform Onyx. PBM enables the sender of funds to specify certain conditions relative to funds released. This may include such items as validity periods or a set of controls on how funds can be spent by the recipient. Such conditions can be programmed in through the use of smart contracts. Baking specific parameters in from the outset in turn empowers the distributor to automate disbursements to beneficiaries. With disbursements automated, the process realizes efficiency gains. Manual oversight can be cut out of the process entirely.  DBS noted a previous program established during the Singapore Fintech Festival in 2023. It involved 27 local fintech firms. Prominent among them were Advance Intelligence, Experian Singapore, Intersystems, Dobin and Aspire. DBS Bank effected such payments over its permissioned blockchain, ensuring that specified recipients received the grants only when specific parameters had been met. SFA President Shadab Taiyabi commented on the pilot project, stating:“The solution is designed to streamline business grant disbursements that enables local companies to receive payouts more quickly and efficiently, providing them with additional capital to expand their key business areas.” Taiyabi added that the SFA will continue to support collaborations between the public and private sectors relative to programmable grant disbursements as Singapore works towards its Smart Nation objectives.Photo by Mike Enerio on UnsplashEfficiency gains Han Kwee Juan, DBS Bank’s country head, emphasized the efficiency gains, stating: “Smart contract technology automates and streamlines grant disbursements for government agencies to enable faster, more secure disbursements and payments.” While DBS has progressed this project as a consequence of its collaboration with MAS on PBM, the bank has also been working with the Singaporean regulator on Project Orchid, a project which aims to progress technology and competencies relative to the development of a digital Singaporean dollar. Similarly, it has participated in Project Guardian, an asset tokenization initiative between policymakers and the financial industry. Earlier this month, DBS entered into a collaboration with Ant International, the international division of the Ant Group which in turn is an affiliate of Chinese e-commerce behemoth, Alibaba, with the aim of providing treasury tokens to improve treasury and liquidity management.