Nomura and Brevan Howard back Polygon-powered Libre Protocol

Taiwan to review crypto ETFs amid developments overseasThe Financial Supervisory Commission (FSC) in Taiwan has disclosed its close examination of foreign cryptocurrency futures products and exchange-traded funds (ETFs), signaling a potential shift in its regulatory approach.According to a report in Chinese-language financial newspaper, Taiwan’s Commercial Times, the FSC aims to gradually ease restrictions, aligning its stance with global market conditions.Photo by bordercollie 1712 on UnsplashResponding to crypto ETF activity internationallyThe Taiwanese regulator is carrying out this exploration against the backdrop of significant global developments. The possibility of the Federal Reserve cutting interest rates and the upcoming review by the U.S. Securities and Exchange Commission (SEC) of the spot bitcoin ETF in January next year are key factors influencing the FSC’s considerations.The anticipation surrounding the Bitcoin halving in April, combined with speculation that a spot bitcoin ETF approval is imminent in the U.S., have contributed to a 145% surge this year in Bitcoin’s unit price, adding momentum to that regulatory contemplation in Taiwan. There has been speculation that BlackRock, the world’s largest fund manager, is already preparing for the approval of its iShares Bitcoin Trust ETF.Recognizing the potential impact of a Bitcoin index stock fund, contingent on SEC approval and subsequent public investment permission, the FSC is closely monitoring global trends.Closer to home, it emerged last month that Hong Kong’s Securities and Futures Commission (SFC) is actively exploring the possibility of permitting retail participation in a spot crypto ETF. Domestic investment banks in Taiwan, attuned to these developments, have expressed longstanding interest in introducing similar crypto products.The FSC draws parallels with global counterparts, citing the proliferation of cryptocurrency futures products and ETFs in various markets.Cautious regulatory reviewAdopting a phased approach, the FSC emphasizes self-discipline and standards in relaxing regulations around crypto ETFs. This cautious strategy aligns with Taiwan’s historical prudence, previously observed in the delayed approval of cryptocurrency ETFs and blockchain ETFs due to concerns over volatility and speculative nature.As Taiwan contemplates a significant move into the cryptocurrency ETF domain, industry players remain cautiously optimistic. While some had considered private placements for overseas cryptocurrency ETFs, challenges such as tightened regulatory supervision and concerns over errors and price lags prompted a reevaluation.Earlier this month, ETF issuer ProShares launched its short Ether-linked ETF product on the New York Stock Exchange’s Arca, using the ticker symbol SETH. Spot bitcoin ETFs have been launched in Canada, Germany, Australia and Brazil. The products have also been made available via tax havens such as the Cayman Islands, Jersey, Liechtenstein and Guernsey.The regulator in Taiwan hints at a potential strategy involving “cryptocurrency concept ETFs.” These funds could invest in cryptocurrency-related software and hardware vendors, offering investors exposure to the industry without direct linkage to cryptocurrency price fluctuations.

The United Arab Emirates (UAE) is updating its tax policy such that cryptocurrency-related transfers and conversions will be exempt from value-added tax (VAT).  News of the policy change emerged via the UAE’s Federal Tax Authority (FTA), which published an Arabic version of the updated tax code on Oct. 2, followed by the publication of an English version on Oct. 4.Photo by Darcey Beau on UnsplashExemption backdated to 2018British multinational consulting firm PricewaterhouseCoopers (PwC) published a review of the UAE tax code update on Oct. 4. The auditing firm noted that virtual assets are defined within the UAE tax code as a “representation of value that can be digitally traded or converted and can be used for investment purposes.”It noted that Article 42 of the update dealt with the crypto VAT exemption. The firm suggested that entities dealing with crypto should “analyze the impact of the exemption on their (retrospective) VAT position, especially in respect to their input tax recovery,” adding that voluntary disclosures may be required to correct previous tax returns. Additionally, a VAT exemption has been introduced on services extended to fund managers relative to licensed funds. Younis Haji Al Khoori, a UAE Ministry of Finance official, stated that the amendments have been made with a view towards easing the burden on businesses. He stated:“These amendments help minimise misunderstandings, simplify procedures, and ultimately contribute to an improved quality of life for all.”  Crypto-friendlyAbdulla Al Dhaheri, CEO of the Blockchain Center in Abu Dhabi, commented on the development on X, stating:”The UAE, driven by visionary leadership, continues to set the global standard by becoming the number 1 destination for blockchain innovation. With the elimination of VAT on crypto transfers and conversions, the UAE reinforce their commitment to building a world-leading digital economy, attracting the best talent and investment from around the globe.” The UAE, and particularly Dubai and Abu Dhabi, have taken great strides forward in ensuring regulatory clarity for the virtual assets sector over the course of the past two years. Regulatory frameworks have been put in place, leading to many participants in the crypto sector praising the regulatory stance taken within the UAE.  This latest addition has equally being welcomed within the crypto sector. Many crypto sector participants have highlighted it as a wake-up call for other jurisdictions to follow suit or see crypto enterprises move to the UAE.  The Indian authorities, in particular, have an unfavorable tax policy in place relative to digital assets, with a 1% tax deducted at source (TDS) being applied. This latest development in the UAE prompted some to consider if India would learn from the UAE’s example. Earlier this year, the Indonesian tax framework, which subjects crypto assets to both income tax and VAT, was cited as the main reason for a slump in crypto trading. A recently published report by blockchain data platform Chainalysis found that the Middle East & North Africa (MENA) region accounts for 7.5% of crypto trading volume, with the report noting that the UAE, alongside Saudi Arabia, is showing a strong interest in decentralized platforms.

Backpack Exchange, a crypto exchange that joined the Japan Virtual Currency Exchange Association (JVCEA) last December, has recently acquired FTX EU, the European arm of the failed crypto exchange business FTX. According to a press release, the business comes with a European MiFID II license, with the acquisition having been approved by the Cypriot regulator, the Cyprus Securities and Exchange Commission (CySEC). Furthermore, a Delaware bankruptcy court in the United States, which is dealing with the FTX bankruptcy, has also rubber-stamped the acquisition. Backpack Exchange was co-founded by CEO Armani Ferrante, alongside other former FTX executives. According to the firm’s LinkedIn page, it has established its headquarters in Japan. The company also has links to Dubai, having acquired a Virtual Asset Service Provider (VASP) license for its Backpack Wallet product from  Dubai’s Virtual Assets Regulatory Authority (VARA) in 2023.Photo by Christian Lue on UnsplashRebuilding trust As a consequence of having acquired FTX’s European arm, Backpack Exchange will now assume responsibility for the distribution of court-approved FTX bankruptcy claims to FTX EU users. In the company’s press release, Ferrante spoke of the importance of the distribution process in rebuilding trust. He stated: "Customer restitution is a crucial step to rebuild trust and confidence in the industry, and Backpack is committed to returning FTX EU customers’ funds as fast and as safely as possible." In response to a query from FTX creditor activist Sunil Kavuri on X, Ferrante outlined that FTX EU users “will only be able to claim their euro claims funds directly from Backpack EU.” Ferrante clarified that FTX EU customers who had pending crypto withdrawals at the time of the bankruptcy will have their crypto claims dealt with via the FTX bankruptcy estate. In a Series A financing round early last year, Backpack was valued at $120 million. Through FTX EU, it now acquires a MiFID II license, further facilitating the global expansion of the company. With FTX EU now forming Backpack’s EU arm, the company will offer crypto-derivative products, including perpetual futures. This product offering is scheduled to go live in Q1 2025. Bankruptcy process controversy The bankruptcy of FTX EU has been controversial, starting off with the European entity being illegally filed into a U.S. bankruptcy process. In early 2024, the FTX Debtors suggested that the entity was worthless. It later wanted to buy out the entity itself, outbidding a third-party bidder. A short time afterwards, the FTX Debtors reached a settlement with the former FTX EU team. It’s understood that Backpack has acquired FTX EU for $32 million.  The FTX Debtors’ attempt to buy the business itself has cast a cloud over the bankruptcy process. When it first emerged that the business had been sold, there was some speculation as to if this would mean a rebooted FTX within the European market, but Backpack’s acquisition confirms that this was not to be the outcome.  Japan could have offered another opportunity to reboot the business, but instead, FTX Japan was acquired by bitFlyer and absorbed into its existing business. With regard to the main FTX business entity, the FTX Debtors told the bankruptcy court that there was no interest in the business from buyers.