Hivemind Capital Partners expands into Hong Kong market

Korean Crypto Exchange Group Installs Separate Division to Prevent Money LaunderingThe Digital Asset Exchange Alliance (DAXA), a group of five major Korean crypto exchanges, announced yesterday that it has installed a division to prevent money laundering.©Pexels/Anna TarazevichAML division’s roleThe anti-money laundering (AML) division will devise suspicious transaction report types, create guidelines to assess risks at virtual asset service providers, and hold various seminars.With the new AML division installed, DAXA now has five divisions, the other four of which are responsible for trading support, market monitoring, compliance monitoring, and education.Improving listing and delisting guidelinesDAXA also plans to improve listing and delisting guidelines that exchanges can share.DAXA vice chairman Kim Jae-jin said long-term efforts are required to build a healthy virtual asset ecosystem, calling for exchanges’ stronger voluntary compliance.

Hong Kong is gearing up for the potential approval and implementation of both bitcoin exchange-traded funds (ETFs) and stablecoin regulations in 2024, with further progress achieved through the first filing of a spot bitcoin ETF in the Chinese autonomous territory.Photo by André François McKenzie on UnsplashHarvest Fund filesHarvest Fund (HFM), a major asset manager based in China, has taken the lead by filing for a spot bitcoin ETF with the Hong Kong Securities and Futures Commission (SFA), as reported by Tencent News. While details on the Harvest Fund bitcoin ETF remain limited, the company is hoping for its debut on or after the Lunar New Year holiday, which lands on Feb. 10. Reports suggest that Hong Kong's regulatory body may follow a path similar to the U.S. SEC, approving multiple spot bitcoin ETF applications to ensure fair market access. Although Harvest Fund was the first to apply, other regional financial institutions have expressed interest in launching similar products within the year. Livio Weng, Chief Operating Officer of crypto exchange HashKey, revealed that approximately ten asset management firms are developing spot crypto ETFs for Hong Kong, with applications already submitted to the Hong Kong Securities Regulatory Commission. Earlier this month, Venture Smart Financial Holdings (VSFG) announced its plan to launch a spot bitcoin ETF within the first quarter of this year, contributing to the growing momentum. Stablecoin interestIn tandem with the push for spot crypto ETFs, there is a rising interest in stablecoins. Multiple Hong Kong companies, including Harvest Global Investments, RD Technologies and VSFG, are reportedly engaging in discussions with the Hong Kong Monetary Authority (HKMA) about potential stablecoin trials. These trials aim to explore use cases ahead of anticipated stablecoin regulations in Hong Kong. The HKMA's December consultation paper outlined licensing requirements for fiat-pegged stablecoins, positioning them as a bridge between traditional finance and crypto markets. Sean Lee, senior advisor and head of stablecoin at VSFG, told The Block that it is committed to applying for sandbox inclusion, along with consortium partners, to showcase the potential of programmable digital money while meeting prudential requirements. An HKMA spokesperson confirmed ongoing preparations for the imminent launch of the stablecoin sandbox arrangement. The key criterion for applicants is a demonstrated commitment to a reasonable plan for issuing fiat-reference stablecoins (FRS) in Hong Kong. FRS refers to fiat-reference stablecoins pegged to the value of a fiat currency and backed by a government-issued currency, aligning with the most common stablecoin model. Eddie Yue, CEO of the HKMA, highlighted the potential of stablecoins, stating they could serve as the interface between traditional finance and the virtual asset market. The parallel development of spot crypto ETFs and stablecoin regulations underscores Hong Kong's commitment to fostering digital assets while ensuring investor protection through effective market oversight. Crypto ETFs offer expanded access, while stablecoin trials enable controlled experimentation, establishing gateways between traditional finance and the emerging crypto sectors.  

No Turkish Delight for Crypto Exchange CEO Sentenced to 11,196 YearsIn a landmark ruling, Faruk Fatih Ozer, the 29-year-old Turkish Founder and CEO of defunct Turkish crypto exchange Thodex, has been sentenced to 11,196 years in prison for orchestrating a massive fraud that left investors out of pocket.Photo by engin akyurt on UnsplashExtradited from AlbaniaBloomberg reported on Friday that Ozer, the mastermind behind the Thodex exchange, fled to Albania in 2021, vanishing along with millions of dollars in investor assets as the exchange suddenly crumbled.His arrest in Albania on an Interpol warrant marked the beginning of a lengthy legal battle. Having spent months on the run, he was finally extradited back to Turkey in June, where he faced charges of money laundering, fraud, and organized crime. During the trial in Istanbul, Ozer defended himself, claiming that his actions did not demonstrate criminal intent. He asserted:“I am smart enough to lead any institution on Earth.”“That is evident in this company I established at the age of 22. I wouldn’t have acted so amateurishly if this were a criminal organization,” he added. Nevertheless, the court found him guilty, along with his sister Serap and brother Guven, who faced the same charges.Lengthy jail termThe sentences handed down were notably long, with the defendants sentenced separately for multiple crimes against 2,027 victims. Following the abolition of the death penalty in 2004, lengthy prison sentences are quite common in Turkey.Prosecutors had initially sought a jaw-dropping 40,562-year prison sentence for Ozer, although the difference would have been purely symbolic when compared with the sentence which was ultimately handed down. The Thodex exchange, founded in 2017, quickly rose to prominence as one of Turkey’s largest cryptocurrency platforms.Ozer’s financial acumen earned him national recognition, and he even cultivated ties with influential pro-government figures. However, the sudden implosion of the Thodex exchange in April 2021 shook the cryptocurrency world. Investor assets vanished, and Ozer went into hiding.Reports initially indicated that Ozer had fled with assets worth $2 billion, but the prosecutor’s indictment put the total losses to Thodex investors at 356 million Turkish liras. The depreciation of the lira and rampant inflation since the exchange’s collapse means that this amount is now equivalent to around $13 million on the international markets.Lagging regulationThe Thodex case serves as a stark reminder of cryptocurrency market risks, given its immature state and the lag in regulators responding to the innovation in order to ensure a safe marketplace for investors.Despite this setback in the development of the crypto ecosystem within Turkey, interest in crypto is stronger than ever. A recent report produced by Seychelles-based crypto exchange KuCoin found that there has been a significant increase in crypto market participants in Turkey over the course of the past 18 months. It’s likely that runaway inflation of the Turkish lira is providing Turks with the motivation to investigate crypto as an alternative.