Schlagwort: blockchain regulation

• Hong Kong’s Securities and Futures Commission (SFC) banned the two crypto websites for scamming users.
• HongKongDAO and BitCuped were blocked after a joint effort of the police and internet providers.
• The two cases come not long after investors lost over 1.6 billion HKD ($204 million) in JPEX and Hounax.

Hong Kong’s Securities and Futures Commission (SFC) has reportedly banned two cryptocurrency websites over allegations the site had scammed investors.

The South China Morning Post reported on Wednesday that the securities watchdog had blacklisted and blocked access to the HongKongDAO and BitCuped sites after authorities were tipped off that the platforms were misleading investors.

HongKongDAO touted “HKD” token

According to the SCMP, Hong Kong regulators found that HongKongDAO had hoodwinked users into buying a token dubbed “HKD”. The platform also offered false assurances, lying to users that it had applied for licences from the SFC and government.

HongKongDAO was reportedly on the SFC’s radar since November 24 and was found to have two chat groups. The Chinese chat group had over 10,000 members, while the English one had over 1,700. The project had ostensibly touted HKD as a token with huge market value.

The regulator worked with the police and internet service providers to have the HongKongDAO website blocked. SFC also issued a cease and desist notice to crypto trading platforms, asking them to halt any trading of tokens linked to HongKongDAO.

BitCuped falsely listed Hong Kong Exchange officials as owners

BitCuped, on the other hand, misled investors by falsely listing Hong Kong Exchanges and Clearing (HKEX) chairman Laura Cha and CEO Nicolas Aguzin as affiliated with the platform. SFC noted that neither individual had any connection with BitCuped.

The site misled investors by claiming to offer crypto and stocks trading services, the regulator said. It was blacklisted on November 10.

While the two sites have been banned for scamming investors, the SFC did not disclose how many people had fallen victim, or the total losses suffered. Police investigations are underway, the SMCP reported.

Hong Kong regulators and law enforcement are increasing their efforts to prevent scams such as those that recently involved crypto platforms Hounax and JPEX. In the two cases, fraudulent actors saw more than 1.6 billion HKD ($204 million) stolen from victims.

In August, the SFC warned crypto platforms and exchanges against misleading investors with false claims about their registration status. The regulator also cautioned providers against offering products and services not registered or authorised by the commission.

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• Paxos has received two in-principle approvals from the Financial Services Regulatory Authority in the Abu Dhabi Global Market (ADGM).
• The company will issue USD-pegged stablecoins as well as crypto brokerage and custody services.

Blockchain infrastructure firm Paxos has scored another regulatory milestone as it expands its reach globally.

On Wednesday, the New York-based company announced it had secured two preliminary approvals to issue stablecoins in Abu Dhabi.

Paxos regulated in the Abu Dhabi Global Market

Specifically, the Financial Services Regulatory Authority in the Abu Dhabi Global Market (ADGM) has granted Paxos two in-principle approvals not just for stablecoin issuance, but also for crypto brokerage and custody services.

Paxos will offer these products and services via to FSRA-regulated entities. The agency will also regulate the stablecoin and tokenization company’s services offered out of the ADGM.

“Today’s announcement marks yet another milestone in Paxos’ ability to provide billions of users with safe and trusted digital asset services. Our IPAs from the FSRA, on the heels of our IPA from the Monetary Authority of Singapore, solidify our commitment to pursuing international growth through regulated frameworks,” Walter Hessert, head of strategy at Paxos, said.

Paxos has partnerships with PayPal, Mastercard, Nubank, Bank of America Mercado Libre, and Societe Generale among other crypto and financial industry players. The company issues various US dollar pegged stablecoins, including PayPal USD (PYUSD), Pax Dollar (USDP) and Pax Gold (PAXG).

In February, the company terminated its relationship with Binance over the branding and issuance of Binance USD (BUSD). This followed an order from the New York Department of Financial Services (NYDFS).

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• The Financial Stability Board (FSB) says multifunction crypto-asset intermediaries (MCIs) are critical to the cryptocurrency ecosystem.
• However, their business models have vulnerabilities and risks that may negatively impact global financial stability.
• The FSB recommends a global approach and cooperation on regulation of these MCIs.

The Financial Stability Board (FSB), an international organisation that monitors and makes recommendations about the global financial system, is seeking for greater cooperation among national regulatory bodies when it comes to the regulation of crypto.

In particular, the FSB has called for cross-border collaboration between different regulators across the globe in the supervision of multifunction crypto-asset intermediaries (MCIs). While critical to the crypto ecosystem, there are risks and vulnerabilities linked to crypto behemoths that combine services and products.

These risks can be impactful on global financial stability, the FSB said.

MCI vulnerabilities

In its report published on Tuesday, the FSB describes MCIs as “individual firms, or groups of affiliated firms – such as FTX (prior to its failure) – that combine a broad range of crypto-asset services, products, and functions.”

Per the Swiss-based organisation, these services and products typically marks a trading platform’s operations and bear similarities to those handled in traditional finance.

However, unlike in crypto, traditional finance platforms do not usually offer all these under the same entity. Often, restrictions are applied “to prevent conflicts of interest and promote market integrity, investor protection, and financial stability.”

While it says vulnerabilities in crypto, including leverage, liquidity mismatch, and technology, are not dissimilar to those in traditional finance, a combination of functions only works to exacerbate the potential vulnerabilities.

Examples of combined functions at MCIs include proprietary trading, market making and lending and borrowing. FSB pointed to the collapse of crypto-friendly banks this year as an indicator of how growing interconnectedness could pose risks.

Allowing crypto firms to combine different activities as is with MCIs risks vulnerabilities that can have negative impact on the global financial system, FSB warned in its report. A global approach to regulatory enforcement across the crypto-asset markets is therefore needed, the agency recommended.

Concerns and issues in the latest report are a follow up on FSB’s February 2023 report on risks of decentralised finance (DeFi) on financial stability. The FSB also released a global regulatory framework for crypto, which the G20 endorsed in September this year.

As highlighted last week, crypto exchange Binance agreed a historic $4.3 billion penalty as settlement with US authorities, with its founder and then CEO stepping down.

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• UK Chancellor Jeremy Hunt has revealed plans for a cryptocurrency legislative initiative.
• The government aims to pass legislation to officially establish the Digital Securities Sandbox (DSS).
• The DSS will provide a controlled testing environment for crypto technologies and services.

In a move aimed at bolstering the digital asset sector, UK Chancellor of the Exchequer Jeremy Hunt announced a legislative proposal for a Digital Securities Sandbox (DSS) during the mini-budget announcement on Wednesday.

As part of the Autumn Statement, Chancellor Hunt outlined 110 measures for economic growth, including the introduction of the Digital Securities Sandbox.

The proposed Digital Securities Sandbox (DSS)

The proposed legislation aims to create a controlled testing environment for crypto technologies and services, facilitating the adoption of digital assets across financial markets.

The government plans to lay a statutory instrument to officially implement the DSS, in line with the Edinburgh Reform announcement to establish a Financial Market Infrastructure Sandbox in 2023. The DSS initiative is slated to commence in the first quarter of 2024.

In July, the UK government initiated a consultation on the DSS, which is run by the Bank of England and the Financial Conduct Authority. The objective is to strike a balance between fostering innovation and maintaining regulatory standards. Feedback from the industry has praised the emphasis on innovation without compromising on regulatory outcomes.

However, the DSS has some exclusions, notably unbacked cryptoassets, due to the absence of an established regulatory regime. The early activities in the DSS are expected to be focused on GBP-only assets, with the potential inclusion of non-GBP digital assets subject to a decision by the Bank of England.

Implications for the digital asset industry

The Digital Securities Sandbox represents a significant commitment by the UK government to provide a supportive environment for the growth of the digital asset sector. Industry experts, including Zodia Markets General Counsel Dina White, see this as a crucial step in the digitalization of financial instruments.

White notes that the DSS will enable firms to experiment with digital asset technology, establishing critical financial market infrastructure such as central securities depositories and trading venues. This move aligns with the broader trend of digitalization across financial instruments, paving the way for experimentation within an established industry.

The introduction of the Digital Securities Sandbox reflects the UK government’s proactive approach to integrating digital assets into the financial landscape. The controlled testing environment is expected to encourage innovation while ensuring regulatory oversight, contributing to the ongoing evolution of the digital asset sector in the UK.

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• Commerzbank has become the first full-service bank in Germany to receive regulatory approval for a crypto custody licence.

Commerzbank, among the top four largest banks in Germany, has taken a huge step towards providing its clients access to secure digital assets custody. This is after it became the first full-service bank in the country to receive a crypto custody licence from the Federal Financial Supervisory Authority (BaFin).

The regulatory approval was granted pursuant to the German Banking Act (KWG), Frankfurt-based Commerzbank said in an announcement on Wednesday.

Commerzbank eyes crypto custody

According to the details shared in the press release, the licence allows the bank to develop its digital asset services solutions, including one that specifically targets crypto assets.

“Now that we have been granted the licence, we have achieved an important milestone. This highlights our ongoing commitment to applying the latest technologies and innovations, and it forms the foundation for supporting our customers in the areas of digital assets,” Dr Jörg Oliveri del Castillo-Schulz, the COO of Commerzbank, noted.

Providing custody for crypto assets will allow the bank to serve a wide range of customers, including from the burgeoning blockchain technology industry. 

As CoinJournal reported, Germany’s top bank Deutsche Bank announced a patnership with Swiss-based crypto firm Taurus in September. The collaboration allowed the bank to offer custody solutions for digital assets and tokenized financial instruments.

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