Tax burden contributes to Indonesian crypto exchange trading slump

Nassau and Treasure Labs Go Metaverse to Step into the Future of StyleKorean sports equipment manufacturer Nassau has entered into a partnership with metaverse company Treasure Labs to step into the future of style.According to a report by local news agency News1, this collaboration aims to introduce an innovative fashion brand on Pararium, the metaverse platform developed by Treasure Labs. Pararium users will have the opportunity to enjoy unique fashion items through their avatars while engaging in virtual experiences and earning rewards.Photo by Ben Hershey on UnsplashSports brandHaving built a reputable brand over the course of 50 years, Nassau is widely recognized in Korea for producing durable sports goods. By joining forces with Treasure Labs, Nassau aims to tap into the potential of Web3 content and services to enhance its global market presence.Metaverse platformTreasure Labs has been establishing a strong presence in the metaverse sector through collaborations with various entities such as blockchain platform Solana Labs, cryptocurrency exchange Crypto.com, and decentralized gaming platform The Sandbox. Notably, Treasure Labs is the first Korean company to secure investment from the Solana Foundation, the sister organization of Solana Labs.Both companies are enthusiastic about the prospects of this partnership. A representative from Treasure Labs emphasized that the collaboration will introduce a creative fashion brand that appeals to millennials and Generation Z, bridging the virtual and real worlds within the metaverse. The representative further mentioned plans to establish a dedicated brand hall within Pararium, where a series of events will showcase unique and trendy Web3 content. Echoing this sentiment, a Nassau official anticipates that the collaboration will give both firms a competitive edge in the global market.

Tongli Han, the CEO and CIO of Harvest Global, has expressed openness to the possibility of applying to offer Bitcoin and Ether exchange-traded funds (ETFs) to mainland Chinese investors through the Stock Connect program. This consideration is contingent on favorable developments in the next two years. Harvest Global, along with China Asset Management (ChinaAMC) and Bosera HashKey, recently launched Asia's first spot Bitcoin and Ether ETFs on the Hong Kong Stock Exchange, aligning with Hong Kong's ambition to establish itself as a global cryptocurrency hub. Han's remarks were delivered during the Bitcoin Asia conference in Hong Kong, underscoring the potential for expansion into the mainland Chinese market.Photo by Jimmy Chan on PexelsUncertain regulatory landscape and growth prospectsDespite the introduction of spot crypto ETFs in Hong Kong, uncertainty looms over mainland Chinese investors' access to such products through the Stock Connect program. China's regulatory stance towards the cryptocurrency industry remains stringent, with most commercial crypto activities prohibited on the mainland. While there is speculation regarding the potential inclusion of crypto ETFs in the eligible securities list of the Stock Connect program, approval remains uncertain. The debut of Hong Kong's spot crypto ETFs recorded modest trading volumes compared to their U.S. counterparts, signaling a cautious start. However, Han anticipates the potential for growth in the Asia region, envisioning the Hong Kong ETFs to potentially double the size of their U.S. counterparts. Despite differing opinions on growth prospects, market observers highlight challenges such as the relatively small size of the Hong Kong ETF market and restrictions on mainland Chinese investors' participation, underscoring the complexities facing the expansion of crypto ETFs in the region. 

Kbank’s Upbit Customer Deposits Total $2.2BKbank, an internet-only bank in South Korea, is facing criticism due to its relatively high proportion of cryptocurrency customer deposits compared to other banks. Kbank reportedly manages approximately KRW 3 trillion (equivalent to $2.2 billion) in deposits from customers of cryptocurrency exchange Upbit, which accounts for about 18% of its total customer deposits.This percentage stands out, being notably higher than other banks that provide accounts to the other four crypto-to-fiat exchanges in Korea. That is according to a report by Maeil Business Newspaper, which obtained documents submitted to lawmaker Kim Hee-gon by the Financial Services Commission (FSC).According to Korean law, crypto exchanges must secure real-name bank accounts from banks to offer crypto trading services against the Korean won. Kbank offers its accounts to Upbit, the dominant player in the Korean crypto market.Photo by David McBee on PexelsNotable exposure to crypto exchangeThe FSC documents showed that Kbank’s Upbit customer deposits totaled KRW 3.09 trillion, making up 18% of its total deposits, which amount to KRW 17.2 trillion.In a striking contrast, Nonghyup Bank had 0.2% of its deposits, equivalent to KRW 557.8 billion, in Bithumb, which is the nation’s second-largest cryptocurrency exchange. Kakaobank, another internet-only bank, had 0.3% (KRW 112.2 billion) of its deposits in Coinone. Shinhan Bank held 0.01% (KRW 43 billion) in Korbit, and Jeonbuk Bank had a similarly small 0.02% (KRW 4.2 billion) in Gopax.Lawmaker Kim pointed out that Kbank has become a bank dedicated to crypto trading. Kim proposed that financial authorities take proactive measures to assess the potential risks that may emerge when Kbank utilizes Upbit customer deposits as a basis for offering credit loans. Such risky financial practices could potentially result in higher loan defaults and the emergence of a greater number of individuals with poor credit histories, which could ultimately jeopardize the stability of the financial market.Regulatory gapThe current Financial Transaction Reporting Act mandates that virtual asset service providers (VASPs) segregate customer deposits from their own assets as a measure to combat money laundering. However, it has been noted that there are regulatory gaps stemming from the absence of specific guidelines for the custody of these deposits.According to the Financial Supervisory Service (FSS), Nonghyup and Kakaobank store deposits in separate accounts within the bank. On the other hand, Kbank and Jeonbuk Bank keep deposits in corporate accounts under their respective exchange partners’ names.When deposits are stored in separate accounts within the bank, only the bank has access to those funds, and they are essentially operated in a manner similar to a trust, preventing the bank from using the funds arbitrarily. In contrast, funds held in corporate accounts can be used by the bank as a source for lending. Lawmaker Kim warned that in scenarios such as exchange bankruptcies or similar situations, banks holding customer funds in corporate accounts could face difficulties in ensuring customer protection.Each of these banks receives reserve funds from crypto exchanges in anticipation of potential compensation requirements in the event of unforeseen losses. The FSS states that as of the end of last month, the reserve amounts held by each bank were as follows: Kbank had KRW 200 billion, Nonghyup Bank had KRW 100 billion, Kakao Bank had KRW 73 billion, and both Shinhan Bank and Jeonbuk Bank had KRW 30 billion.Kbank’s Upbit customer deposits are approximately 72 times larger than Shinhan Bank’s Korbit customer deposits. However, the reserve amounts held by Kbank are only 6.7 times greater than those held by Shinhan. Lawmaker Kim emphasized the importance of banks maintaining reserve funds that are proportional to the customer deposits held in their partner crypto exchanges.Signs of recoveryMeanwhile, the Korean cryptocurrency industry, which faced a downturn in the latter half of last year due to events like the Terra collapse and FTX’s bankruptcy, has exhibited signs of recovery in the first half of this year.The Financial Intelligence Unit (FIU) of the FSC recently reported that the cryptocurrency market cap in South Korea has reached KRW 28.4 trillion as of the end of June this year. This reflects a 46% increase compared to the end of last year when it stood at KRW 19.4 trillion. Additionally, the total operating profit of domestic exchanges surged by 82% to KRW 227.3 billion over the past six months, compared to the previous figure of KRW 124.9 billion.The total market’s max drawdown (MDD) was 62%. MDD assesses the extent to which an asset has declined in value from its highest point to its lowest point within a specific time frame, before experiencing a recovery. The FIU considers this MDD to be high, urging investor caution.