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Hong Kong discusses CBDC in its Fintech strategy report

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Hong Kong has been in the news lately over its recent change in crypto regulations. While the city seems to be carefully regulating the crypto-verse, it did not shy away from embracing central bank digital currencies [CBDC].

CBDCs emerged as a great interest to many governments across the globe. The potentials of these assets lured many in, however, China’s progress in the same coerced several countries to explore the digital world. As the adoption and dominance of these yet-to-be-released assets were inevitable, every region from around the world began preparing to accommodate CBDCs. Hong Kong seemed to be the latest region to jump onto the CBDC bandwagon. The city’s financial regulator,  Hong Kong Monetary Authority [HKMA] portrayed its plunge in digitalization in its recent report titled, “Fintech 2025”.

Hong Kong’s leap towards digitalization

In this report, HKMA pointed out that the city hopes to render the comprehensive adoption of cryptocurrency by 2025. The regulator hopes to achieve this via five major steps. This further required all the banks in the region to embrace financial technology.

With regard to CBDC, the regulators intend to “future-proof” the city for CBDCs. The report revealed that HKMA would bolster its research in the field of CBDC in order to issue the same at wholesale as well as retail levels. The report further read,

“In addition to the continued effort on wholesale CBDCs, the HKMA has been working with the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre to research retail CBDCs and will begin a study on e-HKD to understand its use cases, benefits, and related risks. The HKMA will also continue to collaborate with the People’s Bank of China in supporting the technical testing of e-CNY in Hong Kong with a view to providing a convenient means of cross-boundary payments for both domestic and mainland residents.”

China’s advancement in the field of CBDC has caused fear among many regions. However, China seemed to be joining forces with Hong Kong with respect to CBDC. The world’s most populous country even took the digital yuan to Hong Kong in order to test it for cross-border payments.

Furthermore, HKMA’s list included the formulation of next-gen data infrastructure, expansion of fintech savvy workforce, and funding and policymaking that nurtures the ecosystem.

Hong Kong official endorses government’s conditional crypto regulation

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While several regions across the globe were seen rolling out revised laws in order to address the emerging crypto industry, Hong Kong was seen taking a different path.

Previously, the Hong Kong government revealed that it wouldn’t ban crypto trading, but would limit it to “professional investors”. This law restricted the trading of digital assets to those whose portfolios consisted of a minimum of HK$8 million. Speaking about the same, the Financial Services and the Treasury Bureau [FSTB] of the city suggested that this change was “appropriate at least for the initial stage of the licensing regime.”

More recently, the Secretary of the FSTB, Christopher Hui detailed why the latest regulatory measure was important.

Hong Kong’s controversial crypto law

FSTB’s Secretary Hui recently spoke at the StartmeupHK virtual fintech summit and went on to address the financial regulator’s latest move. While the city did not outrightly ban the trading of crypto, it went on to restrict it to professional traders only. While this excluded the majority of the city’s population, Hui went on to say that this law was necessary to secure investors while also expediting progress. Hui said,

“We are of the view that a proper regulatory system could facilitate development and at the same time protect investors and adhere to international regulatory standards.”

The evolution of the crypto market stunned many. With some pocketing billions, the fan base of the crypto-verse continued to escalate.The volatile nature of the crypto industry, on the other hand, has stood out, causing even more fear among people. As governments rush to protect people from enduring major losses, Hong Kong was paved a new path.

Elaborating on the same, Hui said in his speech,

“Imposing mandatory requirements to protect investors, prohibit market manipulation, and guard against money laundering and terrorist financing, we believe the proposed regime will further facilitate development of the virtual assets industry in Hong Kong, leveraging our world-class regulatory framework.”

Hong Kong citizens have to be “professional investors” to use licensed crypto exchanges

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Several regions across the world have been embracing crypto after its five-fold surge. Hong Kong, however, has limited the trading of crypto to professional investors.

While the crypto-verse started out as a market free from the shackles of governments across the world, its constant association with the dark web forced authorities to intervene. Despite this, the crypto-verse is considered a decentralized system free to all. This appears to be changing with time as several governments have started to ban the trading of digital assets while outrightly calling them a sham.

Hong Kong seems to have joined this list with its latest announcement. However, the region is doing things a little differently. In its latest report, Reuters revealed that not all citizens of Hong Kong would be allowed to trade or use a cryptocurrency exchange. The services offered by any licensed crypto platform in Hong Kong would be confined to professional traders only.

Hong Kong upgrades its crypto laws

The aforementioned laws reportedly came into notice in the government proposals that were published today. The volatile nature of the crypto-verse has made several billionaires while destroying the savings/ investments of many others. Authorities across the globe have been striving to protect their citizens from enduring any major loss through crypto. Hong Kong seemed to be doing the same by restricting its citizens from using these assets.

As per the city’s law, a person would be considered a professional investor only if his/her/ their portfolio consists of $1.03 million or HK$8 million. Hong Kong’s Financial Services and the Treasury Bureau [FSTB] stated,

“[…] confining the services of a VA exchange to professional investors…. is appropriate at least for the initial stage of the licensing regime.”

Additionally, prominent Chinese new portal, 8BTC pointed out the importance of getting a crypto exchange licensed in the city. The platform tweeted,

Furthermore, noting the repercussions of failing to do so, 8BTC added,

“Carrying out regulated virtual asset activities without a license is liable to a fine of HK$5 million and imprisonment for seven years; And, in the case of a continuing offense, a further fine of HK$100,000 for each day during which the offense was continued.”

China Takes Digital Yuan To Hong Kong For A Cross-Border Pilot

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China has been spearheading the entire central bank digital currency [CBDC] game. The Covid-19 pandemic enhanced the importance of digitalization as a mere human touch had the ability to cause death. While several countries despise cryptocurrencies they still decided to go ahead with a central bank digital currency.

While the world fears that China could garner financial and technological dominance over the globe, several countries have been forced to fasten the pace in the development of their respective CBDC. Japan recently revealed that it would soon roll out Phase 1 of its CBDC pilot. Just when all the regions are prepping for the launch of this digital asset, China revealed that it had conducted its first cross-border pilot of its CBDC.

China’s Digital Yuan Moves Ahead With Full Force

As per a recent report from a local news platform, Sina Finance China has taken the digital yuan to Hong Kong to explore the cross-border aspect. The Chinese central bank, People’s Bank of China’s [PBoC] digital currency research bureau’s director, Wang Xin revealed that a couple of technical tests were done to review the cross-border phase of the Chinese digital currency.

Wang Xin reportedly made this announcement at the State Council Information Office of China hosted a press conference earlier this week. During this event, the official pointed out that the PBoC had joined hands with the Hong Kong Monetary Authority for this pilot.

Additionally, several platforms across the country have been testing the digital yuan. Recently, the country had given the public a chance to test the digital yuan. Several shoppers reportedly carried out over a thousand transactions during the Women’s day weekend.

Speaking about the emergence of CBDCs, Wang Xin told CNBC,

“On one hand, this is related to more and more central banks in the world participating in the development of domestic digital currencies. On the other hand, this (interest) may also be related to the large increase in the price of bitcoin.”

Hong Kong Regulators Give Fidelity-Backed Digital Asset Platform A Green Signal

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Seeking approval from financial regulators has become one of the biggest problems of the crypto industry. Hong Kong has been working towards regulating crypto platforms and even put in place laws to keep them in check. As a result of this, the crypto platforms operating in Hong Kong are mandated to have a license.  Abiding by these laws, a prominent digital asset firm, OSL had previously sought a license from the Securities and Futures Commission of Hong Kong.

Hong Kong Mandates The Need Of License For Crypto Platforms

In a recent announcement, OSL revealed that it would deliver its digital asset services to the corridors of Hong Kong. The platform is a part of BC Group which is backed by Fidelity. The Securities and Futures Commission [SFC] got an application for a license from OSL back in November and was the first to apply for a crypto license in the region. While the SFC gave the platform a thumbs-up back in August 2020, OSL reportedly brushed up on all the requirements that the SFC had asked for.

With this license, OSL can deliver an array of digital asset-related services to the citizens of Hong Kong. The platform is all set to open up trading for prominent cryptocurrencies like Bitcoin [BTC], Ethereum [ETH] along with several other assets. OSL Digital Securities will also allow users to avail select security token offerings [STOs].

The world seems to be coming to terms with the fact that the institutional interest has been zooming towards Bitcoin and other assets. Elaborating on the same, Wayne Trench, the CEO of OSL said,

“Institutions, and other professional investors, including HNWIs and family offices, can now trade digital assets with the region’s most comprehensive and trusted digital asset platform in OSL. Because the framework is under the auspices of a leading global regulator and modeled after existing licensing for financial services, clients can trade with confidence under the protections and safeguards to which they are accustomed.”

Regulators have been upping their game following the emergence of a number of crypto platforms. Digital asset platforms are making sure to comply with the laws put forth by regulators across the globe. OSL went a step ahead as the digital asset platform revealed that it had applied for a digital asset license under the Payments Services Act from the Monetary Authority of Singapore [MAS].

The latest license acquired by the OSL from the SFC makes the digital asset platform the first firm to attain a license from the SFC.

Fintech Gets Another Boost from China as Standard Chartered Completes Cross-Blockchain Trade with Hong Kong

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Blockchain solutions have taken the world by storm over the past couple of years with multiple integrations with several sectors. Organizations were not the only ones utilizing the technology as state governments have also taken a keen liking to the not-so-niche industry.

China is one of the major regions taking a deep dive into the technology with multiple areas testing out different versions of blockchain. Recently, Standard Chartered Bank announced the completion of a cross-block transaction between Hong Kong and China, marking a major step forward in the area.

The original transaction was conducted between the People’s Bank of China Trade Finance Platform in China and the eTradeConnect platform in Hong Kong. Earlier releases had pointed to the usage of the digital Yuan for this very same purpose but there was no mention about it in the latest move. China’s lean towards a digital yuan made massive headlines in 2019 as it made the first P5 country to adopt blockchain wholeheartedly.

Hong Kong Monetary Authority Executive Director Colin Pou claimed that the adoption of new technologies would make large scale transactions much more seamless and safer. He added:

“The Proof-of-Concept trial (PoC) that connects eTradeConnect and the PBCTFP aims to provide importers and exporters in both places with more convenient trade finance services.”

Standard Chartered’s experience in the blockchain industry can be traced back to the formation of the seven bank association testing cross border transactions. The other members who participated in the fund transfer were the ICBC, Bank of China, and Bank of Communications (including Hong Kong subsidiaries). China’s increased focus on the blockchain has also forced other countries to sit up and take notice of the newly burgeoning industry. The Red Dragon had previously conducted internal tests within Guangdong, Macau, and Hong Kong.

Hong Kong and China began work on blockchain solutions over a year ago while creating a framework for Central bank Digital Currency [CBDC]. The eTradeConnect partnership is operated by Chinese firm Oneconnect with the intention of scaling the blockchain usage. There are also plans to expand the platform utilities to regions such as Europe and the rest of the Asian market.

Hong Kong Crypto Exchanges Will Soon Be Obligated To Follow Regulations

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Cryptocurrencies are finally finding their place in the global financial scene. Cities like Hong Kong have been making progress in the same. As the value of these assets has been surging, people have been veering towards the crypto industry. More people diving into the market has definitely sparked up some hacks and scams. In order to keep this in control, the regulators of different countries have been putting into place new laws and amendments to the existing ones. Hong Kong seems to be heading in that direction.

Regulation Is A Must In Hong Kong Crypto Scene

The Securities and Futures Commission [SFC] of Hong Kong revealed that every crypto exchange in the purview of the city was subject to regulations. In a Fintech Week program that took place on Tuesday, Ashley Alder, the Chief Executive Officer of Hong Kong’s Securities and Futures Commission affirmed that crypto platforms functioning in the city of Hong Kong would be regulated even if they do not trade security tokens.

Elaborating on the same, Alder said in his speech,

“Under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security.”

Last year, the SFC proposed that the crypto platforms were to voluntarily abide by the regulatory framework put forth by the financial watchdogs of the city. However, certain exchanges continued to steer away from this and engaged in operations without keeping in mind the regulations.

Furthermore, the SFC will be initiating a new program with regard to licensing of platforms keeping in mind anti-money laundering schemes. While this is still underway, platforms that aid cryptocurrency trading in the city would be monitored and regulated as soon as the regimes are out and about.

With news pertaining to breach of regulations from across the globe, several governments have been sprucing up their game. BitMEX and OKEx’s latest swim in troubled waters is proof enough that irrespective of their popularity exchanges must abide by rules and regulations. The Hong Kong financial watchdog made it clear that anyone that fails to register their platform or abide by the regulations would be categorized as offenders of the law.

Hong Kong Newspaper Apple Daily Carries Full Page Bitcoin Advertisement Few Days After CEO Was Arrested

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Bitcoin’s reach has gone far and beyond what people expected when it first came to the forefront more than a decade ago. From being considered as a niche virtual asset that would die out quickly to become one of the largest disruptors of the financial market, Bitcoin has certainly pulled its weight over the past few years.

The cryptocurrency’s mainstream appeal has sparked a global interest that has transcended the standards set by traditional banking institutions. Bitcoin’s popularity has surged so much that an advertisement for it was even spotted in a major Hong Kong daily.

Today, on August 24, citizens of Hong Kong spotted a full advert for Bitcoin in the Apple Daily, a popular daily publication in Hong Kong. The advert carried the message ‘Bitcoin will never ditch you, which was probably a rebuttal to major banks who are mired in controversies. The newspaper also printed out Satoshi Nakamoto’s name underneath the quote which has not provided any other leads as of yet.

The advertisement also came with an excerpt stating:

“Bitcoin is digital money. It is not issued or controlled by any government or corporation. Nobody can stop you from transacting on the network and it cannot be shut down. Bitcoin is available to anyone regardless of their nationality, gender, or beliefs. Bitcoin began with the GENESIS BLOCK during the financial crisis of 2009. No, its time is coming.”

Despite the size of the ad in the newspaper, it did not inform the users on how and where to procure Bitcoins. The only technical term that was mentioned throughout the ad was related to the genesis block. There were also a few mentions in Cantonese, with a major line saying “Banks, you’re not ditching me today – I’m ditching you.

This was not the first time that Apple Daily has made stirred up so much heat as its CEO Jimmy Lai also played a part in it a few weeks back. On August 10, Lai was arrest by the Hong Kong authorities for allegedly violating the country’s National Security Law. Lai’s arrest led to massive protests by supporters in the streets of Hong Kong, many of them condemning the curbing of the freedom of speech and expression. In the midst of all this controversy, Apple Daily’s stock price shot up by a whopping 1100 percent.

Crypto Firm OSL Receives In-Principle License Approval From Hong Kong’s watchdogs

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The Asian-based cryptocurrency firm, OSL Digital Securities, won the Hong Kong market regulator’s in-principle decision to issue an exchange platform license to operate its crypto-related business in the region.

With this crucial development, the Fidelity-backed BC group is now one step closer to operating as a regulated provider for brokerage and automated trading services, including security tokens. After the latest move, OSL asserted that it would continue to work under the SFC’s regime in a bid to secure a full-provider license in Hong Kong.

Commenting on the authorization, BC Group CEO Hugh Madden stated,

“Securing approval-in-principle for a virtual asset trading platform license in Hong Kong, inclusive of security tokens, underscores our commitment to comprehensively addressing the demands of institutional investors”

In response to growing anti-money-laundering [AML] and know-your-customer [KYC] concerns, Hong Kong’s Securities and Futures Commission expanded its regulatory oversight for cryptocurrency exchange treating them as traditional securities brokerages and allowed these platforms to opt into regulation under its new rules.

Essentially, the “in-principle” decision is the first step of the full authorization process in which the applicant platform is required to satisfy one or more requirements set by the Securities and Futures Commission [SFC] in order to obtain a license.

SFC had unveiled its new set of rules for the cryptocurrency exchanges in November last year. It details how the Platforms must address custody and compliance, in particular with regard to the KYC and AML rules. The published documents also state that exchanges can only offer products to “professional investors.” In addition, they will also be required to file a monthly report to the Commission.

The 61-paged document stated,

“The adoption of the new regulatory framework will enable the SFC to formulate its future
regulatory strategy for virtual assets through close supervisory interactions with an
evolving and dynamic industry.”

The exchanges will need the regulator’s approval for offering new products. Besides, SFC does not consider direct peer-to-peer platforms for licensing. Interestingly, OSL was the first and the only platform to apply for the license.

Bitcoin ATM ‘Loopholes’ Exploited in Hong Kong, Trio arrested

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Automated Teller Machines [ATMs] has acted as the backbone of the retail payments landscape for over fifty years. Acting as a physical access point, ATMs have now made its way to the digital age money space we now know it as the cryptocurrency industry. Over the years, Bitcoin ATMs have sprung up at a highly impressive rate. And with it, the crimes.

In the latest development, the Hong Kong authorities reportedly arrested three persons linked with the alleged siphoning off $226,000 in Hong Kong dollars from six Bitcoin ATMs in 11 transactions. The police suspected that the arrested individuals are the”core members” of a “larger syndicate”.

According to the South China Morning Post report, the three males arrested were between 26 and 55 years of age. The two platforms reportedly suspected foul play and exploitation of “loopholes” in the Bitcoin ATMs after noticing cash withdrawals. The authorities were able to arrest the trio two days after cryptocurrency exchanges had filed a report.This development was first of its kind in the Mong Kok region

Following the arrest, the Superintendent of Hong Kong’s Cyber Security and Technology Crime Bureau [CSTCB], Wilson Tam reportedly stated,

“I cannot reveal what the loopholes are. But any bitcoin transaction needs verification. Maybe the ring bypassed the verifying process before taking the money.”

Tam further revealed to have offered to the two cryptocurrency companies to upgrade their systems.

Consistent growth of Bitcoin ATMs

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According to the Bitcoin ATM tracking website Coin ATM Radar, there were a total of 9,106 Bitcoin ATMs in the world while 52 of them are in Hong Kong. Interestingly, since the start of the year, Bitcoin ATM installations have doubled.

Increasing criminal activities tied to Bitcoin ATMs

While the expansion of the Bitcoin ATM marketplace has been nothing short of remarkable, it is the soaring criminal activity leveraging this space that has become a cause of concern.

Across the Pacific, Bitcoin ATMs in the US sent more funds to high-risk cryptocurrency exchanges than low-risk exchanges in 2019. This was found by a recent report by Cipher Trace, the percentage of funds from the US-based Bitcoin ATMs sent to this category of exchanges had grown exponentially.

According to the crypto-analytic firm, high-risk exchanges are classified as those which have a record of nefarious activities known for facilitating criminal activities and money laundering. And it was also found that as high as 8% of the US Bitcoin ATM payments are sent directly to high-risk exchanges.

Dismantle of Bitcoin ATM operation 

In another development, the U.S. Department of Justice [DOJ] last month revealed to have taken down a Bitcoin ATM operation worth $25 million. It also reportedly seized 17 machines along with some cryptocurrencies from a man who was not licensed for Bitcoin ATM operations.

The perpetrator, Kais Mohammad, further admitted laundering of millions of dollars of Bitcoins as well as cash