Hong Kong is getting ahead, set to announce retail crypto trading under new rules coming in on June 1st. Crypto companies are flocking there, signalling their interest to register for licenses. China is going all in on the Metaverse. And even the World Economic Forum is weighing in on the need for clear- or any- crypto regulation. Otherwise a relatively quiet week in crypto. ICO then NFT ‘experts’ or pumpers seem to be flocking to selling not very good ChatGPT prompts generated by, yes, ChatGPT.
Hong Kong set to announce retail crypto trading under new rules from June 1st, crypto firms rush in
Hong Kong is set to announce new rules allowing retail investors to trade cryptocurrencies as part of its bid to position itself as a digital assets hub. The city’s regulator intends to ensure safeguards including knowledge tests, risk profiles and reasonable limits on exposure are in place, and says that cryptocurrencies available to retail investors should be included in at least two investible indexes from independent providers, of which one should have experience in the traditional financial sector. This is part of of a broader effort to re-establish its status as a premier financial center, as part of which Hong Kong is introducing a licensing regime for digital asset platforms on June 1. As global regulators are struggling with how to deal with crypto, Hong Kong, along with Dubai, is trying to attract crypto investment and businesses. Several crypto companies have announced intent to move there and are said to signalling their interest for VASP licenses, which would allow them to serve retail investors.
Hong Kong Police Force launch new metaverse platform, ‘CyberDefender’
Hong Kong isn’t just forward planning regarding crypto. The city’s Police Force’s Cyber Security and Technology Crime Bureau has launched a metaverse security platform, CyberDefender. It’s aimed at educating the public about potential dangers related to Web3 and the metaverse, preparing them for the inevitable challenges that come with a new and future digital age. Chief Inspector Ip Cheuk-yu highlighted that crimes that happen in cyberspace would also realistically occur in the metaverse, including investment frauds, unauthorised system access, theft, and sexual offences. He also thinks the decentralised nature of virtual assets could increase the risk of asset theft, with end-point devices, virtual asset wallets, and smart contracts being appealing targets for cybercriminals. The HK police are smart to jump ahead to policing the metaverse. In Q1 this year, the Force reported 663 incidents involving virtual assets, amounting to a total loss of $570 million, a 75% rise compared to Q1 2022. Already.
Chinese city releases policy draft for metaverse industry development
Even if Meta and the West are reducing the noises they’re making about the metaverse, China is going in the opposite direction. Some Chinese cities are going all in. Zhengzhou has proposed policies to encourage the growth of metaverse companies in the region including establishing a dedicated 10 billion yuan ($1.42 billion) fund to stimulate development in industry around the metaverse. The draft says that metaverse companies relocating their headquarters to Zhengzhou could receive a startup capital investment of up to 200 million yuan ($28.34 million), along with rent subsidies. Even if they don’t relocate their HQs, companies developing metaverse use cases in the city will be able to obtain up to 5 million yuan ($710,000) per viable project. The city also plans to partner with other government agencies and investment firms to secure an extra 50 billion yuan ($7.08 billion) to support metaverse-related projects. Metaverse companies listed on China’s primary stock exchanges will also be financially rewarded. The plan involves blockchain and aims to create a digital asset market using NFT (nonfungible token technology). Zhengzhou joins a plethora of Chinese cities and provinces aiming to become leaders in China’s metaverse development. Shanghai is predicting its metaverse industry will reach annual revenue of 350 billion yuan ($49.6 billion) by 2025.
Chinese state media removes video on crypto after Binance CEO calls it ‘big deal’
China is not surprisingly not taking the same stance as Hong Kong towards crypto. China’s state-affiliated media company, CCTV, showed a video on cryptocurrency compliance in Hong Kong. It also featured a Solana-based memecoin. Not surprisingly, the video went slightly viral on Crypto Twitter, mostly because crypto is banned in China and a video by a state affiliated company would be interpreted by many as equivalent to a video direct from the Government in support of crypto. Binance CEO CZ called the video a “big deal” and stated that previous coverages like these have “led to bull runs”. The day after the video aired, CCTV removed it from its platform, possibly to try and belatedly reduce speculation. Adding fuel to the issue, the memecoin the video featured was soon found to be a pump and dump scheme.
Beijing’s Internet 3.0 white paper focuses on metaverse, a little web3, not crypto
Beijing has released a report focused on the evolution of the internet into 3D virtual spaces, widely referred to as ‘Internet 3.0’. While the “Beijing Internet 3.0 Innovation Development White Paper” briefly touches on Web3 and NFTs, it not surprisingly does not signal a shift towards embracing cryptocurrency in China. The report centers on the integration of virtual and real worlds via digital twins, empowering creators by providing open authoring tools and standards, and the necessary technical architecture, which includes AI, blockchain, special computing chips, and advanced communication networks such as 5G and 6G. One slightly worrying inclusion is the proposed use of brain-computer interfaces for interaction. If one has privacy or other concerns about mass-facial recognition and scanning, this is next level.
EU Investment Firms Should Clearly State Crypto Is Unregulated, Watchdog Says
The European Securities and Markets Authority (ESMA) has warned that companies that market crypto as well as traditional securities might mislead consumers about access to fair advice and compensation. The authority is worried these companies might leverage their regulatory approval for traditional finance to imply secure financial advice or compensation schemes for cryptocurrency, which it has described as high risk. “ESMA recommends that investment firms take all necessary measures to ensure that clients are fully aware of the regulatory status of the product/service they are receiving and clearly disclose to clients when regulatory protections do not apply” the authority stated, emphasising its worry that regulatory approval risks being exploited as a promotional tool amid a regulatory ambiguity period before the implementation of the Markets in Crypto Assets regulation (MiCA). MiCA is set to impose stricter rules on the sector in approximately 18 months and it worries some crypto firms might take advantage of that time to get away with marketing they won’t be able to do when the new rules come into play.
WEF publishes crypto asset regulation recommendations for government, industry
The World Economic Forum has released a white paper on crypto asset regulation, focused on what it calls an urgent need for global cooperation in regulation. The report acknowledges that crypto assets need different regulation to traditional sectors. “Crypto-assets and their ecosystem do not always fit squarely into the existing activity-based, intermediary-focused approach of regulation, even where crypto-asset activities mirror those of the traditional financial sector” it says, confirming what everyone working in crypto assets has been saying all along. It mentions how potential regulation is complicated by the anonymity provided by crypto mixers, self-hosted wallets and decentralised exchanges. The WEF was assisted by its Digital Currency Governance Consortium in the report.
Indian Crypto Exchanges Are in Survival Mode, Trying to Extend Their Runways
Indian crypto exchanges are struggling following the introduction of new taxes. The exchanges are said to be engaging in aggressive cost-cutting measures, including renegotiating contracts, halting employee salary increases and layoffs as well as exploring new revenue models and rebrands in a bid to extend their operational lifespans amid an uncertain regulatory environment. Several Indian exchanges have estimated they have operational runways of 21 months to four years, which could be fine, if there is another bull run before then. The troubles started on Feb 1, 2022, when India implemented a 30% tax on crypto profits and a 1% tax deducted at source on all transactions. Crypto trading volumes crashed, in some cases by up to 70%. India’s government then imposed a a “shadow ban”, which saw local payment processors severing banking access to crypto exchanges. This led to a further crash in crypto trading. By 2023, more than $3.8 billion in trading volume moved from Indian to international exchanges. International governments have been watching.
Digital Currency Group Is Closing Down its trade execution and prime brokerage services unit TradeBlock
Digital Currency Group (DCG) will discontinue its trade execution and prime brokerage services unit TradeBlock, its platform offering trading services to institutional investors, effective from May 31, 2023. This comes after a difficult crypto market as well as regulatory challenges in the digital asset space in the U.S. “Due to the state of the broader economy and prolonged crypto winter, along with the challenging regulatory environment for digital assets in the U.S., we made the decision to sunset the institutional trading platform side of the business, known as TradeBlock,” a DCG spokesperson said. Tough times are continuing for DCG…
Gemini And Genesis File Motion To Dismiss SEC Lawsuit Over Defunct Earn Offering
Crypto exchange Gemini and DCG’s lender Genesis Global Capital have jointly filed a motion to dismiss an SEC lawsuit over Gemini’s now defunct Earn lending program. The exchange and the lender had launched a service named Earn, which promised users interest on their cryptocurrency deposits by reinvesting the assets. However, despite legal filings claiming that Gemini Earn shouldn’t be considered a security, the service ran into difficulties. Genesis stopped withdrawals on Earn in November 2022, leading Gemini to shut down the service permanently on January 10, 2023. Just two days later, the US SEC initiated charges against both firms, accusing them of offering unregistered securities and evading disclosure mandates. On January 19th, Genesis’ lending arm filed for bankruptcy.
Gemini chooses Ireland as EU and European base
Gemini crypto exchange has chosen Dublin as its base for its European operations. Co-founder Cameron Winklevoss said “Ireland is our entry point into the EU” focusing on the future that the new MiCA regulations are expected to bring to the industry. Winklevoss said he predicts a “Cambrian explosion of innovation” in the European crypto industry as a response to MiCA. Of choosing Ireland, he said “We looked at all of the EU as potential entry points and we felt really comfortable with Ireland and the reputation of the regulator, the CBI, as well as the technology community and talent and the ecosystem. So for us, it was an obvious natural fit.” There’s a trend to US and UK crypto companies looking to the EU since MiCA was announced. Ireland’s Prime Minister Leo Varadkar said the Winklevoss twins chose Ireland for its robust regulatory system, deep talent pool and established technology community. “This is significant for Ireland as the government focuses on innovation as a driver of growth.” Gemini was already licensed as a virtual asset service provider by the Central Bank of Ireland and already operates a 12-staff office in Dublin. The exchange is also reportedly considering leaving the US citing ‘hostile’ regulatory conditions there. “There are so many headwinds right now in the US it’s hard to get anything done there” said Cameron Winklevoss “And so in order to keep building our business and invest in hiring, we have to look elsewhere.”
Buying a bank won’t solve crypto’s debanking issue: Binance CEO CZ
Binance CEO CZ has ruled out the possibility of the exchange buying any banks, despite increasing concerns about crypto companies being debanked following the collapse or forced closure of SVB, Silvergate and Signature banks. Binance’s Australian branch has also lost its banking partner and is now seeing Bitcoin at a $5k discount as users are rushing to get their money off the platform. In response to a joke question asking if Binance could buy a crypto-friendly bank, CZ replied “The reality is much more complex than the concept. You buy one bank, it only works in one country, and you still have to deal with the banking regulators of that country. It doesn’t mean you can buy a bank and do whatever you wanna do.” “Then the corresponding banks will tell your bank ‘look if touch crypto, we’re not facilitating your international transactions,” he said. He explained that even if Binance owned a bank, it would face regulatory constraints and potential international transaction issues from correspondent banks. He also raised cost considerations, suggesting Binance might only make minor profits from owning a bank. However, CZ indicated that Binance might make small minority investments in banks to “hopefully influence them to be more crypto-friendly.”
Sanctioned crypto mixer Tornado Cash governance control set to be restored
The governance token holders of crypto mixer Tornado Cash are set to regain control over its operations following the approval of a proposal introduced by the attacker who stole 483,000 of its Tornado Cash (TORN) tokens. The resolution for the governance takeover following the attack won by 517,000 token votes in favour and none against. A previous malicious proposal had enabled the attacker to commandeer 1.2 million votes and further proposals, meaning that control over previously vested governance tokens had been usurped. The attacker surprisingly contacted the Tornado Cash community shortly after the hack, offering a proposal to restore governance control. This unexpected move has aroused scrutiny over the attacker’s motivations and intentions. The hacker did however make off with the stolen tokens, using the mixer against itself to obscure the origins of the crypto they had stolen….
NFT tickets come to F1, debuting at the Monaco Grand Prix
NFT tickets have hit Formula 1. The primary ticket issuer for F1 is now selling race tickets in NFT form, starting with this past weekend’s Monaco Grand Prix. Those choosing to buy the NFT tickets get perks including access to post-events, hospitality perks and future race discounts to encourage brand loyalty, as well as their tickets to the main race. CEO of Elemint, Jacques-Henri Eyraud, said that the use of NFTs in event ticketing could expand beyond F1 into broader sports and entertainment. “The experience becomes more personalized and fun for fans of all types of sports competitions.” Buyers don’t need any Web3 knowledge to buy the NFT tickets, which are minted on the Ethereum sidechain, Polygon.
Some popular NFT collections take massive price hit in 2023
Several prominent NFTs collections from 2022 have seen prices drop by up to 95% in their Ether value. Blue-chip NFT collections have seen an average value decrease of over 40%. Some are seeing this as an opportunity to invest, expecting a revival in value. However, the current market shows a 32% increase in sellers and a 30% decrease in buyers. This trend has seen a parallel in the price of metaverse properties, which have also suffered significant devaluations over the past year.