QCP Trading takes significant step towards full licensing in Singapore

While cryptocurrencies may be banned in China, crypto trading activity continues in some corners, nonetheless, sometimes through accessing overseas exchanges. With that, authorities recently uncovered a massive underground banking operation that exploited crypto trading platforms to evade local forex regulations.Photo by Manuel Joseph on Pexels$2.2 billion laundering operationOn Sunday, an account on popular Chinese social media platform WeChat run by China’s State Administration of Foreign Exchange (SAFE) published details of the $2.2 billion laundering operation bust. Xu Xiao, the Inspector at the Qingdao Branch of the State Administration of Foreign Exchange, revealed that the scheme involved underground banks who purchased virtual currencies and then sold the virtual currencies through overseas trading platforms to obtain the foreign currency they needed. This process, he explained, completes the conversion of yuan and foreign currencies, constituting the illegal act of buying and selling foreign exchange. Stringent capital controlsChina enforces stringent rules on money transfers outside the country. Citizens are limited to exchanging up to $50,000 in foreign currency and require a permit for transactions beyond that limit. Any transaction exceeding the limit without a permit is considered money laundering. During a recent investigation, authorities seized cryptocurrencies valued at approximately $28,000 in Tether, Litecoin and other digital currencies. However, the operation is estimated to have facilitated the movement of over $2.2 billion, involving more than a thousand bank accounts across 17 provinces and municipalities. Monetary control loopholesChina, once the largest cryptocurrency market, imposed a comprehensive ban on crypto exchanges in September 2017 and subsequently expanded its restrictions to include crypto mining and trading. Despite these measures, reports have surfaced about underground crypto exchange operations. Earlier this year, an investigative report by the Wall Street Journal found that global exchange Binance continues to do thriving business with Chinese customers. Global crypto exchanges are reportedly still onboarding Chinese clients indirectly. The South China Morning Post (SCMP) recently accused Binance of facilitating Chinese crypto trading accounts by falsely claiming they are from Taiwan. While mainland China adopts a hostile stance towards cryptocurrencies, the special administrative region of Hong Kong remains progressive in the sector. Hong Kong’s regulatory authorities have introduced specific rules for cryptocurrencies and are licensing crypto exchanges operating within the jurisdiction. Arthur Hayes, the co-founder of the BitMEX crypto derivatives platform, recently described Hong Kong as the gateway for mainland China to global capital markets. Hayes asserted that wealthy Chinese individuals all bank in Hong Kong and with that, they all have access to crypto exchanges and brokers. In Cambodia, it is understood that illicit Chinese-linked activities oftentimes implicate the use of U.S. dollar stablecoin Tether (USDT) to move funds in and out of China even though Tether is banned in Cambodia. The latest crackdown in China underscores the ongoing challenges faced by authorities in controlling crypto-related activities, highlighting the dynamic nature of such activity within and adjacent to mainland China. As regulatory scrutiny intensifies, the contrast between mainland China’s approach and Hong Kong’s more open stance toward cryptocurrencies becomes increasingly evident. 

Korean Blockchain Firm Proposes Fintech Collaboration in CambodiaSouth Korean fintech and blockchain company KONDOR recently made an announcement through a press release regarding the establishment of a blockchain fintech advisory board in Cambodia. The firm has proposed a business agreement to the Securities and Exchange Regulator of Cambodia (SERC) with the aim of ensuring sustainable growth in the financial sector and capital markets.Photo by allPhoto Bangkok on PexelsFintech advisory boardThe advisory board comprises experts from various fields, including finance, economics, law, blockchain technology, fintech, and artificial intelligence. They will function independently, offering counsel on policy decisions.Sou Soucheat, Director General of SERC, highlighted that Cambodia is currently in the process of rebuilding and has a youth-driven economy and financial markets. He sees the collaboration with KONDOR as a valuable opportunity to develop a future-oriented financial system.The advisory board will see participation from KONDOR and other notable members, namely VEXK, a global digital asset exchange in Vietnam; Blue Contents, a Honolulu-based digital economy research center; and the Paññāsāstra University of Cambodia, a key player in the country’s educational field.KONDOR and VEXK have put forth a proposal for the joint establishment of a trust company and the pursuit of a custody license in alignment with Cambodia’s revised trust law of 2019.Procuring licensesFollowing the proposal’s approval, VEXK plans to procure a license as a digital asset exchange, as well as a license to establish a trust company. This would enable VEXK to effectively oversee clients’ digital and physical assets through accounts within the established trust company. The safety of these assets will be ensured through insurance coverage provided by reputable global insurers. Furthermore, VEXK will acquire the ability to facilitate USD trading and will retain the digital asset exchange license for five years.The license application will gain support from the SDG Impact Fund, a US-based organization managing $11 billion worth of assets, and the Estates & Infrastructure Exchange (EIX), a project bond exchange based in London.EIX CEO Mark Worrall said that active support from a securities regulator in the dynamic and expanding Web3 era would certainly contribute to Cambodia’s economic growth.

Hong Kong Crypto Exchange Contemplates Sale at HK$1 Billion ValuationHong Kong’s BC Technology Group is reportedly considering the sale of its crypto platform, OSL, with a suggested valuation of approximately HK$1 billion ($128 million).Photo by Samuel Chan on UnsplashDiscussions with potential buyersThat’s according to a report published by Bloomberg on Monday. OSL holds the distinction of being one of only two exchanges alongside competitor HashKey licensed under the digital asset regulations introduced by the city of Hong Kong in June. Bloomberg cited anonymous sources familiar with the matter having revealed that BC Technology has initiated discussions with potential buyers, including industry players and funds.OSL’s platform encompasses prime brokerage, exchange services, and secure custody solutions for the cryptocurrency markets. Furthermore, OSL plays a pivotal role in facilitating financial institutions’ access to virtual asset trading. Rather than a complete sale of the company, BC Technology is considering the possibility of divesting specific parts of the business, according to these sources.It’s important to note that these deliberations are ongoing, and there is no guarantee that they will culminate in a final deal, as highlighted by the insiders. In response to an inquiry from Bloomberg News, a representative from BC Technology stated:“We are a highly transparent and regulated company. We do not comment on market rumors and speculations.”Valuable trading licenseOSL's regulatory licensing is likely to add considerably to its value. Earlier this year it emerged that digital asset sector firms were shelling out a range between HK$20 million and HK$200 million in their efforts to secure crypto trading licenses in Hong Kong.In May the company obtained Type 1, 4, and 9 licensing from Hong Kong’s Securities and Futures Commission (SFC) through its OSL Asset Management (OSLAM) business. Following the acquisition of licensing, the firm moved to launch its first fund, concentrating on blockchain, artificial intelligence (AI), and Web3 technologies.Hong Kong’s crypto hub challengesHong Kong enabled retail-level crypto trading on June 1, with the aim of further establishing the city as a hub for the cryptocurrency sector. The regulatory change enabled retail investors to trade larger tokens such as Bitcoin and Ethereum on licensed exchanges. Despite these efforts, demand for cryptocurrencies remains lackluster due to the lingering effects of last year’s wave of crypto sector bankruptcies.To compound matters, Hong Kong is also grappling with the repercussions of the JPEX exchange scandal, an unlicensed Dubai-headquartered entity that further tarnished the reputation of the digital asset industry in the region.BC Technology’s market value has shown substantial growth, surging to almost HK$1.9 billion from its low point earlier in the year. However, the company’s shares remain down by 80% from their peak in June 2021, which coincided with the cryptocurrency market’s frenzy during the pandemic.In response to market developments, OSL has withdrawn its application for a digital asset license in Singapore and it is preparing a revised submission. It’s worth noting that certain clients from Singapore are being transitioned to the exchange in Hong Kong.