https://forkast.news/south-korea-sentences-ex-coinone-bribery/

Two former employees at Coinone, one of South Korea’s top five cryptocurrency exchanges, were sentenced Tuesday for accepting bribes in exchange for listing certain cryptocurrencies on the platform for over two years from 2020, local news agency Newsis reported.  

Note: It is common practice in South Korea for authorities to release only the surname of defendants due to privacy regulations.

See related article: South Korea’s Kakao, Com2Us wind down metaverse units

Fast facts

• The first defendant, Jeon, 41, the former head of crypto listing at Coinone, was given four years in prison and ordered to pay back 1.93 billion Korean won (US$1.43 million) in unlawfully earned profits, according to Newsis. Jeon was arrested on March 22, 2023 for charges of bribery and breach of trust.
• The second defendant, Kim, 31, who worked alongside Jeon, was sentenced to 42 months in prison, with a penalty of 883 million won (US$654,000) for the same charges. 
• Two brokers Koh and Hwang, who were accused of facilitating the listing bribes, received 18 months and 30 months in prison, respectively. 
• Seoul Southern District Court judge Kim Jung-gi said in his ruling that the crime was “a collusion between multiple conspirators including crypto exchange listing staff, brokers, token issuers, and market making companies to share profits from issuing new coins and manipulating market prices,” according to Newsis.
• Prosecutors previously alleged that some of the tokens at issue were affiliated with companies that were hired to manipulate crypto prices. Those local cryptocurrencies are reported to include Pica Coin and Puriever.
• “Some exchanges do practice transparency in listing tokens, but many exchange employees have engaged in such behavior as common practice,” said Seoul-based information security and financial crime expert Hwang Suk-jin in a previous interview with Forkast.
• The Bank of Korea valued the nation’s cryptocurrency market at 19 trillion won (US$14.1 billion) as of the end of last year, making it one of the largest cryptocurrency markets in the world.
• Coinone did not immediately respond to Forkast’s email request for further comments on the sentencing sent Wednesday afternoon in Asia.

See related article: South Koreans hold nearly US$100 billion in crypto overseas

https://forkast.news/jpmorgan-uk-bank-chase-bans-payments-linked-to-crypto/

Chase, the U.K.-based digital bank subsidiary under JPMorgan Chase, told customers Tuesday in an email that it will ban U.K. clients from making crypto-related payments or outgoing bank transfers starting Oct. 16 due to crypto scams, according to Reuters.

See related article: U.K. bill to regulate crypto assets passes into law, offering ‘rocket boost’ for economy

Fast facts

• “We’ve seen an increase in the number of crypto scams targeting U.K. consumers, so we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site from a Chase account,” a spokesperson for Chase told Reuters.
• Chase, which launched its app-based service in the U.K. in 2021, amassed over 1.6 million clients. JP Morgan Chase, its parent company, is the largest bank in the U.S., with total assets worth over US$3 trillion.
• Earlier in March, U.K.-based NatWest Bank limited its customers’ payments to crypto exchanges to 1,000 British pounds (US$1,214) per day as a safeguard against crypto theft. NatWest noted in its March press release that its U.K. consumers lost 329 million pounds (US$400 million) to crypto scams last year.
• The U.K. has been making efforts to grow its blockchain and crypto sector, with Prime Minister Rishi Sunak a vocal supporter of the industry.
• In June, the U.K. passed the Financial Services and Markets Act 2023, a reform bill that enabled its financial authorities to treat crypto as a regulated financial instrument. While bringing more clarity, the new crypto regulations raised concerns among some crypto advocates in the U.K. due to the limits placed on marketing campaigns.
• Chase Bank has not yet replied to Forkast’s email request for further comments sent Wednesday morning in Asia.

See related article: By royal decree — the UK moves toward regulating crypto

https://forkast.news/binance-japan-partners-mufj-stablecoin-development/

Mitsubishi UFJ Trust and Banking Corporation, the largest banking group in Japan, and Binance Japan — the Japanese arm of the world’s largest cryptocurrency exchange — are collaborating on the issuance of fiat-pegged stablecoins, the two companies announced via a joint press release Tuesday.

See related article: MUFG enables bank-backed stablecoin issuance amid new Japanese regulations

Fast facts

• The partnership will use “Progmat Coin,” which is a platform led by Mitsubishi’s trust bank for stablecoin issuance and management. The platform, initially announced in February 2022, aims to support the issuance of Japanese Yen-pegged stablecoins on public blockchains.  
• Japanese regulators updated the nation’s stablecoin rules in June. 
• Progmat, Mitsubishi’s subsidiary behind the stablecoin platform, is backed by an alliance of major local banks including Mizuho Bank, SMBC and SBI Holdings. 
• With the study, both companies plan to launch new stablecoins pegged to the Japanese yen and other currencies. 
• “We believe that the new stablecoin from this collaboration will be a step forward in advancing the Web 3.0,” said Mitsubishi UFJ vice president of product and founder of Progmat Tatsuya Saito, in the press release. “The impact of having the most secure stablecoin functioning within this ecosystem is immeasurable.”
• Takeshi Chino, general manager of Binance Japan, said the partnership will play a “key role” in connecting Japan’s real economy, blockchain space and the global Binance ecosystem in the future. 
• “Stablecoins have important use cases in the broader financial ecosystem – from a lower-cost and instantaneous cross border trade settlement for business clients, to an on and off ramp to buy and sell other cryptocurrencies seamlessly for retail investors,” Chino explained.
• The joint press release stated that both companies plan on starting stablecoin operations by the end of 2024. 
• Binance launched its Japan subsidiary on Aug. 1, 2023, marking its re-entry into the country two years after receiving a warning from the local financial regulator for failing to comply with registration requirements. Binance acquired local regulated platform Sakura Exchange BitCoin in November last year, which has been rebranded to Binance Japan.
• With its launch, Binance Japan offered 34 tokens, which made it the largest exchange in Japan by token offerings. Those include Binance’s native token BNB, which was traded for the first time in Japan.
• Prime Minister Fumio Kishida, in power since late  2021, supports digital finance and Web3 adoption in Japan to reinvigorate the economy in what he has called “new capitalism.” Web3 refers to the latest wave of technology innovations utilizing blockchain technology, which includes cryptocurrencies, NFTs and the metaverse.

See related article: Binance Japan launches with 34 tokens, BNB debuts in the country

https://forkast.news/hong-kong-crypto-network-mixin-hack-200-million/

Mixin Network, a Hong Kong-based peer-to-peer transactional network for digital assets, announced Monday on X that the database of its cloud service provider was hacked, resulting in the loss of approximately US$200 million. This is the second major crypto hack in Hong Kong this month despite the region’s efforts to protect digital asset investors.

See related article: Hong Kong crypto exchange CoinEx suffers hack, at least US$43 million lost

Fast facts

• Mixin will suspend deposit and withdrawal services until the vulnerabilities have been addressed. Transfers will run as usual.

• Mixin founder Feng Xiaodong said in a live broadcast that the company is currently able to compensate affected users up to a “maximum of 50%,” and the remainder will be paid back in bond tokens which the company will use its profits to buy back, PANews reported.

• The hack follows the security breach on Hong Kong crypto exchange CoinEx, which lost approximately US$70 million from a cyberattack on Sept. 12. 

• Blockchain analytics firm Elliptic suspects the hack was led by North Korea-backed Lazarus Group, as a portion of the stolen funds were sent to an address previously used by the group.

• Hackers stole more than US$3.8 billion in cryptocurrencies last year, according to blockchain forensics firm Chainalysis. North Korea-backed cyber actors hacked US$1.7 billion of that amount.

• Hong Kong has been implementing a slew of regulatory measures this year amid efforts to be a global hub of crypto trading while preparing guardrails for investors against bad actors. Its new rules, which went into effect on June 1, allowed licensed crypto trading platforms to offer services to retail investors.

• However, the region’s crypto sector has recently experienced incidents. Aside from the hacks, Dubai-based crypto exchange JPEX was probed by the local police and financial authorities after fraud allegations of around US$154 million in damages to 1,600 investors.  

See related article: North Korean hackers stole US$41 million from gambling site: FBI

https://forkast.news/headlines/south-korea-nhn-blockchain-games-sui/

NHN Corporation, a South Korean entertainment conglomerate with over US$2.4 billion in total assets, announced Friday that it has partnered with U.S.-based Mysten Labs, the developers of the Sui blockchain, to launch an on-chain game scheduled for 2024. The partnership arrives despite a ban in South Korea against all blockchain-related games.

See related article: It’s time for Web3 gaming to up its own game

Fast facts

• “What excites me about building with NHN is what we’re beginning to refer to as ‘stickiness’ for users,” Evan Cheng, CEO and co-founder of Mysten Labs said in an emailed press release. “It’s a code Web3, as a whole, has not managed to crack, with daily active users on the most popular chains barely topping 300,000. At Mysten Labs, our mission is to bring the benefits of Web3 to the masses, by the billions.”
• NHN Corporation, which started as a game company in 1999, says it has over 37 million registered users on its mobile game titles such as Friends Pop and social casino game Hangame Poker.
• Sui is a layer-1 blockchain network built by Mysten Labs, a Palo Alto-based company founded by engineers who previously worked on Meta’s Diem stablecoin project. Mysten Labs said in Friday’s press release the Sui blockchain is well suited to supporting games given its low fees, fast transactions and high degree of scalability. 
• South Korea has the fourth largest gaming market in the world. It totaled nearly 21 trillion Korean won (US$15.72 billion) in annual revenue in 2021, according to a report from the Korea Creative Content Agency from January.
• Games that involve cryptocurrencies or NFTs in South Korea are banned. The law is enforced by the Game Rating and Administration Committee and prohibits firms from promoting speculative behaviors to players via cashable rewards. All video games must acquire an age rating from the game rating committee for South Korean release. 
• South Korean president Yoon Suk-yeol promised to abolish the play-to-earn (P2E) ban in his election campaign last year. But he is yet to follow through on the promise. South Korean P2E game makers have released blockchain-based games abroad, hoping that the local ban will be lifted. 
• Mysten Labs and NHN did not respond to Forkast’s email request for additional comments sent Monday morning in Asia.

See related article: Sega says still exploring Web3 game initiatives despite reports of withdrawal

https://forkast.news/headlines/south-korea-kakao-com2us-downsize-metaverse/

South Korea’s top internet company Kakao and leading game developer Com2uS are sizing down their metaverse teams as the virtual world platforms recorded large losses in the first half of 2023, local news agency Newsis reported.

See related article: South Koreans hold nearly US$100 billion in crypto overseas

Fast facts

• Com2uS, a major mobile game developer that recorded US$536 million in revenue last year, recently downsized its staff in its metaverse division, according to Newsis. The details regarding the staff cutback have not been revealed.
• The company’s metaverse platform, Com2Verse, officially launched on Aug. 1 this year. However, the business arm behind the metaverse platform recorded an operating loss of about US$6.2 million in the first half of this year.
• Colorverse, another South Korea-based metaverse company, conducted a round of layoffs earlier this year without disclosing the details to the public. Colorverse, owned by Kakao’s gaming subsidiary Kakao Games and its affiliate Neptune, recorded US$8.6 million in losses last year. 
• In July, CyTown, a metaverse revamp of once hugely popular local social media service Cyworld, shut down after a year of service. The virtual platform failed to attract users, recording only around 10,000 downloads on the Google Play app store. 
• A survey conducted by the Korea Information Society Development Institute released in May revealed that only 4.2% of South Korean citizens regularly use metaverse services. The survey’s broad interpretation of what constitutes a “metaverse” platform included popular games Minecraft, Roblox and Animal Crossing.
• Metaverse pioneer Meta, formerly Facebook, saw its metaverse division Reality Labs post US$13.7 billion in losses. 
• In February, ten Japanese companies including Fujitsu, Mitsubishi and Sumitomo Mitsui, agreed to establish the Japan Metaverse Economic Zone, a working group to boost local metaverse infrastructure. The group has made no subsequent announcements relating to the project.
• Meanwhile, China’s Ministry of Industry and Information Technology said Monday that it will look to establish regulatory standards for the metaverse in order to become a world leader in the sector.
• Kakao and Com2uS have yet to respond to Forkast’s email request for comments sent Friday.

See related article: Crypto and Formula One’s honeymoon is over, can Web3 save a rocky marriage?

https://forkast.news/headlines/south-koreans-us100-billion-crypto-overseas/

South Korean investors and corporations hold over 131 trillion Korean won (US$97.9 billion) worth of cryptocurrencies in overseas accounts, South Korea’s National Tax Service announced Wednesday. The figure is 70% of the total reported financial assets held by South Koreans overseas.

See related article: Korea Blockchain Week: diverging crypto paths for the US and Asia

Fast facts

• In an annual assessment of monthly tax filings carried out from January to June this year, South Korea’s National Tax Service found 1,432 retail investors and corporations hold the near US$100 billion of overseas crypto assets.
• South Korean residents and corporations with over 500 million won (US$372,939) worth of overseas assets are required to report those assets to tax authorities. 2023 marks the first year South Korea’s tax authorities included crypto in its annual assessment.
• 5,419 retail investors and corporations reported a total of 186.4 trillion won (US$139 billion) in overseas financial assets of all kinds. That figure is a 191.3% increase on last year.
• “This year saw a record number of filers and amounts because foreign virtual asset accounts were included for the first time,” the National Tax Service wrote in a press release. 
• The press release said that authorities will use cross-border transactions data to identify anyone who avoids reporting their overseas asset holdings. It will also strictly enforce penalties including criminal charges for those found guilty of doing so, it said.
• In 2021, South Korea effectively banned foreign cryptocurrency exchanges from operating in the country. However, South Korean residents may still trade cryptocurrencies via overseas exchanges.

See related article: South Korea’s Hana bank partners with BitGo on digital asset services

https://forkast.news/headlines/sec-more-charges-on-crypto-defi/

The U.S. Securities and Exchange Commission will expand its regulatory enforcement beyond Coinbase and Binance.US onto other cryptocurrency exchanges, intermediaries and decentralized finance (DeFi) entities, the agency’s head of crypto assets and cyber unit David Hirsch said Tuesday at a forum in Chicago.

See related article: U.S. SEC denied immediate access to Binance.US software

Fast facts

• The SEC is currently investigating other companies that have allegedly conducted similar breaches as Coinbase and Binance.US, Hirsch said at the Securities Enforcement Forum Central in Chicago.
• “We’re going to continue to bring those charges,” said Hirsch, adding that intermediaries such as brokers, dealers and clearing agencies that are not fulfilling their obligations will not escape the regulator’s reach.
• The SEC sued Coinbase and Binance.US in June, based on accusations that the two major crypto platforms were offering unregistered securities, which deprived investors of protection against conflicts of interest and other risks. 
• The agency’s longstanding legal battle with Ripple Labs is also centered around the SEC’s claim that sales of XRP constituted the unregistered offering of investment contracts.
• Hirsch further added that adding a “DeFi” label to an operation will not help circumvent the SEC’s enforcement. 
• In the agency’s enforcement action against the Stoner Cats non-fungible token (NFT) project, SEC enforcement director Gurbir Grewal said the “economic reality of the offering” determines an offering as a financial security, not its labels.

See related article: SEC fines Stoner Cats for selling unregistered securities as NFTs

https://forkast.news/headlines/citigroup-digital-token-service/

Citigroup, the third largest banking institution in the U.S., announced Monday the launch of Citi Token Services, a blockchain-based cross-border payments solution for institutional clients.

See related article: Standard Chartered’s crypto custody arm Zodia launches in Singapore

Fast facts

• The service will use tokenized deposits and smart contracts to provide real-time cross-border settlements and liquidity for institutional clients anywhere in the world and around the clock, Citi said in a press release. 
• “[The news] is another sign that the big financial institutions continue to embrace blockchain technology,” Singapore-based digital asset services platform Matrixport’s head of research and strategy Markus Thielen said in an email statement. “Undoubtedly, blockchain is seen as a technological improvement to the current financial system.”
• Citi Token Services was tested in a piloting program with logistics company Maersk. 
• The private blockchain technology used for Citi Token Services is owned and managed by Citi itself. The company explained that customers will not need to host a blockchain node to use the service.
• JPMorgan Chase & Co. is also exploring a blockchain-based deposit token for faster cross-border payments and settlements, according to a Bloomberg report earlier in September.
• Citigroup has over 13,000 institutional clients including 90% of global Fortune 500 companies, according to the company website. Overall, it has over 100 million customers across nearly 160 countries.

See related article: Coinbase and Wall Street: The merging worlds of TradFi and crypto

https://forkast.news/headlines/us-legislator-discuss-cbdc-prevention-bill/

The U.S. House Financial Services Committee announced last Friday that it will discuss a new bill to prevent the issuance of a central bank digital currency (CBDC).

See related article: Nepal central bank plans CBDC within two years

Fast facts

• Committee Chairman Patrick McHenry announced that the markup, a session where committee members examine the proposal in detail and possibly offer amendments, of the Digital Dollar Pilot Prevention Act will take place on Sept. 20.

• The bill was first introduced by Alex Mooney, a  Republican Party representative, on May 26. 

• “This bill would prohibit the Federal Reserve from establishing, carrying out, or approving a program intended to test the practicability of issuing a CBDC,” Mooney’s announcement said. “CBDCs pose major privacy and government surveillance concerns.”
• He also claimed that China is utilizing its CBDC pilot program to monitor citizens and curtail banking access for government dissenters.

• In July, the Federal Reserve said it had not decided to issue a CBDC and added that legal authorization remains a prerequisite for such developments. 

• The Fed’s statement came as it launched FedNow, a real-time interbank payment settlement service for individuals and businesses, on July 20. According to the U.S. central bank, FedNow is unrelated to digital currencies.

See related article: Asia’s richest man bets on blockchain, CBDC

https://forkast.news/sec-stoner-cats-unregistered-securities-as-nfts/

The makers of Stoner Cats non-fungible tokens (NFT) and its accompanying web series were charged and fined by the Securities and Exchange Commission (SEC) on Wednesday after the federal regulator took issue with Stoner Cats 2, the company behind the collection, raising over US$8 million worth of Ether through offering and selling unregistered securities as NFTs.

Stoner Cats 2 has accepted the regulator’s cease-and-desist order and agreed to the US$1 million civil penalty.

The Stoner Cats NFT project sold 10,320 NFTs of cat-themes animated characters on July 21, 2021 for US$800 each, to finance the animated web series of the same name that is voiced by a star-studded cast including Mila Kunis, Ashton Kutcher and Jane Fonda.

The SEC claims that the company’s marketing campaign led the investors to anticipate further profit in secondary market sales and interest, concluding that Stoner Cats NFTs were indeed financial securities.

“Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that guides the determination of what’s an investment contract and therefore a security,” Gurbir S. Grewal, SEC director of the enforcement division, said in Wednesday’s press release. 

NFTs slide

This is not the first time the SEC has charged an NFT company for offering unregistered securities. On Aug. 28, the agency brought the same charges on California-based media and entertainment company Impact Theory. Like Stoner Cats 2, Impact Theory agreed to the SEC’s cease and desist order and penalty.

SEC has also launched lawsuits against multiple crypto firms including Binance, Coinbase and Ripple Labs for allegedly offering unregistered securities in the form of cryptocurrencies. The enforcement action on Impact theory marks the first case of the U.S. regulator applying this approach to NFTs.

The NFT market is bracing for more. The Forkast 500 NFT Index, which is a proxy measure of the global NFT market performance, dropped 1.63% in the last 24 hours leading up to 1:30 p.m. on Thursday in Hong Kong.

Stoner Cats 2 has not immediately responded to Forkast’s email request for comments.

The Howey Test

SEC commissioners Hester Peirce and Mark Uyeda said in a statement expressing dissent against the enforcement that the SEC’s use of the Howey Test is short of “any meaningful limiting principle.”

Their statement insisted that regulators had to bring clarity to the NFT space before “arbitrarily bringing” charges against projects. 

“Stoner Cats NFTs are not that different from Star Wars collectibles sold in the 1970s,” the statement said, explaining that toy company Kenner sold “early bird” coupons and memberships for future Star Wars-related action figures in order to strengthen the fan community. 

“Would those I.O.U. certificates, which could be re-sold, constitute investment contracts? Using the analysis of today’s enforcement action, the SEC should have parachuted in to save those kids from Star Wars mania,” the statement said.

In determining a financial instrument as a financial security, the SEC uses the Howey Test, which contains four assessment aspects: an investment of money, in a common enterprise, with an expectation of profits, from the efforts of others.

There is no doubt that money was invested. Stoner Cats sold more than 10,000 NFTs at approximately US$800 each, raising around US$8 million. However, the nature of NFTs complicates this criterion. If the primary purpose of buying these digital assets was personal enjoyment or fandom, then the “investment of money” criterion could be up for debate.

The funds raised were earmarked for an animated web series, seemingly tying the fate of the NFTs and the series together. But what if each NFT is unique and not directly tied to the performance of the series or the company? The notion of a “common enterprise” is far from clear-cut in the decentralized world of blockchain.

The SEC argues that Stoner Cats’ marketing led investors to expect profits, especially with the option for NFT owners to resell. However, the motivations for purchasing NFTs can be diverse, ranging from collectibility to utility in a digital ecosystem. If profit isn’t the primary driver, this criterion could be in doubt.

The final prong of the Howey Test examines whether the value of the investment is dependent on the efforts of a third party. While Stoner Cats 2 marketed its expertise and required a 2.5% royalty for secondary market transactions, one could argue that the value of the NFTs could also be derived from their intrinsic qualities or even the actions of the broader community.

https://forkast.news/headlines/ftx-sell-3-billion-in-crypto-assets/

A U.S. bankruptcy court in Delaware approved failed cryptocurrency exchange FTX’s motion to sell its crypto assets at a court hearing on Wednesday. The company, led by restructuring expert John J. Ray III, is looking to repay its creditors while considering a possible revamp of the trading platform.

See related article: Why FTX deserves a second chance

Fast facts

• Delaware bankruptcy court Judge John Dorsey allowed the bankrupt exchange to liquidate up to US$100 million in cryptocurrencies per week, according to court documents. The limit may rise to US$200 million upon approval from two committees representing FTX customers.
• FTX also plans to hedge and stake its crypto through an investment advisor. The company expects these methods to mitigate price volatility risks and earn passive interest, according to the approved proposal. 
• The company has nominated Galaxy Asset Management — a digital asset company led by ex-investment banker Mike Novogratz — to act as an advisor in the process.
• The bankrupt crypto exchange owns US$3.4 billion in crypto assets, according to its court filing. It holds about US$1.16 billion in Solana, US$560 million in Bitcoin and US$192 million in Ether. Other crypto holdings include stablecoin USDT and XRP. 
• FTX and sister hedge fund Alameda Research filed for Chapter 11 bankruptcy protection on Nov. 11, which was followed by allegations of misappropriation of billions of dollars in client funds and other wrongdoings.
• FTX is also trying to claw back millions of dollars it paid celebrity endorsers and sports teams prior to its bankruptcy, including retired basketball player Shaquille O’Neal, tennis professional Naomi Osaka, and the National Basketball Association team Miami Heat.
• Meanwhile, Sam Bankman-Fried, FTX founder and its former chief executive officer, was jailed Aug. 11 for witness tampering, following his arrest in the Bahamas in December 2022. He maintains his innocence and has pleaded not guilty to all 13 charges brought against him including multibillion-dollar wire and securities fraud.

See related article: Bankrupt FTX recovers US$7.3 billion in assets, considers resurrection of operations

https://forkast.news/headlines/astar-polygon-launch-zkevm-solution/

Japan-based Astar Network announced Wednesday that it is launching its zkEVM solution powered by Polygon’s Chain Developer Kit (CDK) to improve the interoperability of its network with Ethereum Virtual Machine (EVM) chains.

See related article: How Japan is illuminating the path of blockchain’s future

Fast facts

• Astar’s zero-knowledge Ethereum Virtual Machine, or zkEVM in short, is a layer-2 scaling solution for Ethereum that offers a more scalable software computing environment for Ethereum-based applications.
• Astar said that it expects the zkEVM to be the “entry point” for international entertainment and gaming projects into Japan.
• A zero-knowledge protocol in blockchain confirms the validity of an on-chain transaction without needing additional interaction or trust between participants. Its benefits include lower gas fees, faster transactions and higher privacy.
• Polygon CDK is an open-source collection of codes that supports developers in launching zero-knowledge layer-2 chains for Ethereum, according to Polygon. Chains built on CDK are interoperable with other CDK chains.  
• “By driving more enterprise adoption through zkEVM, we would also work together with the Japanese Government to enhance Web3 as the national strategy,” Astar founder Sota Watanabe said in a press release.
• Japan’s Prime Minister Fumio Kishida, who assumed his position in 2021, voiced his support for digital finance and Web3 adoption in Japan to reinvigorate the economy in what he has called “new capitalism.” Web3 is often refered to as the latest wave of internet innovations based on blockchain, such as cryptocurrencies, non-fungible tokens and metaverses.

See related article: Sony Network Communications to invest in Japanese Web3 developer Startale Labs

https://forkast.news/headlines/coinex-us43-million-hack/

Hong Kong-based cryptocurrency exchange CoinEx Global suffered a security breach on Tuesday, resulting in an estimated loss of US$43 million in cryptocurrencies.

See related article: Crypto in the time of cockroaches

Fast facts

• The exchange is still assessing the full extent of lost crypto assets in the exploit but said on Wednesday morning that it identified a second set of suspicious wallet addresses linked to the breach, which siphoned off tokens such as Ether, XRP, Solana, Kadena and Dagger.

• Before CoinEx’s latest update, Blockchain security firm PeckShield said on X (formerly Twitter) on Wednesday estimated the exchange’s loss to be around US$43 million. The first set of addresses linked to the hack identified by CoinEx stole Ether, Bitcoin and Tron from the platform.

• CoinEx said a notice shared on its X account on Tuesday following the attack that all user assets are safe and secure. The exchange has suspended deposit and withdrawal services and assured that affected users will receive full compensation for any losses caused by the hack.

• Hackers stole more than US$3.8 billion in cryptocurrencies last year, according to blockchain forensics firm Chainalysis. Out of that amount, North Korea-backed cyber actors hacked US$1.7 billion.

See related article: Crypto hackers stole record US$3.8 bln in 2022, mostly from DeFi and cross-chain bridges: Chainalysis

https://forkast.news/headlines/binance-us-layoff-ceo-brian-shroder/

The U.S. affiliate of the world’s largest cryptocurrency exchange Binance has laid off one-third of its staff, or more than 100 employees. Brian Shroder, the chief executive officer, has also departed the company, a Binance.US spokesperson told Forkast on Wednesday.

See related article: Mastercard and Binance end crypto card partnership, services shut down in Latin America, Middle East 

Fast facts

• This downsizing effort will provide Binance.US “more than seven years of financial runway,” the company spokesperson told Forkast in an email statement. 
• “The SEC’s aggressive attempts to cripple our industry and the resulting impacts on our business have real world consequences for American jobs and innovation, and this is an unfortunate example of that,” the spokesperson added.
• The crypto exchange has been dealing with growing regulatory pressures in the U.S. this year. In June, the company was sued by the Securities and Exchange Commission (SEC) for allegedly violating securities regulations.
• Norman Reed, the company’s chief legal officer, assumed Shroder’s position on an interim basis, the Binance.US spokesperson confirmed with Forkast.
• Binance, the parent company, also faces regulatory scrutiny from the U.S. The Commodity Futures Trading Commission (CFTC) filed a civil suit against the exchange and founder Changpeng Zhao in March for operating an “intentionally opaque” business to take advantage of “regulatory arbitrage.”
• The U.S. Department of Justice is also reported to be closely monitoring Binance with the possibility of pursuing fraud charges against the trading platform. 
• Last week, Binance’s global head of product Mayur Kamat resigned from the company, according to Reuters.

See related article: Binance denies Russia sanctions violation reported by WSJ

https://forkast.news/headlines/standard-chartered-zodia-launch-singapore/

Zodia Custody, the cryptocurrency custodian owned by Standard Chartered, announced Tuesday that it is launching its services in Singapore for financial institutions, CNBC reported. Standard Chartered is a U.K.-based multinational banking conglomerate with total assets of US$838.7 billion as of July 2023.

See related article: Will Singapore steady the stablecoin ship?

Fast facts

• Zodia reportedly said it is the first bank-owned entity to provide crypto custody services for institutional clients in Singapore.
• Singapore is moving to the “next level of maturity” in regulating crypto and developing central bank digital currencies (CBDC), Zodia Chief Executive Officer Julian Sawyer told CNBC.
• Last Wednesday, Zodia said it received an in-principle approval from Abu Dhabi to pursue regulated over-the-counter crypto broker-dealer activities in the United Arab Emirates capital.
• Earlier in February, Zodia announced a joint venture with financial services firm SBI Holdings for custody services in Japan.
• Standard Chartered launched Zodia in July 2021 with Chicago-based financial services firm Northern Trust.
• Several major cryptocurrency firms with a global reach have recently expanded their presence in Singapore. Gemini, the cryptocurrency exchange founded by the Winklevoss brothers, announced in June that it’s growing its headcount in the city-state to operate as an expansion hub in the Asia-Pacific.

See related article: Singapore to require crypto firms to hold customer assets in a trust; restricts lending, staking by retail users

https://forkast.news/headlines/animoca-brands-us20-million-mocaverse/

Animoca Brands, a Hong Kong-based software and investment giant specializing in blockchain entertainment, announced Monday that it has raised US$20 million to accelerate the development of Mocaverse, its flagship project to build a decentralized metaverse.

See related article: Animoca Brands says it holds US$3.4 bln in assets

Fast facts

• The new capital will be used to develop Mocaverse’s core infrastructure, such as its digital identity system and loyalty program. It will also be used to acquire new partners and expand the project’s reach.
• The funding round was led by Hong Kong-based venture capital firm CMCC Global, along with other investors including Kingsway Capital, Liberty City Ventures, GameFi Ventures, Sky Mavis founder Aleksander Larsen, founder of Yield Guild Games Gabby Dizon, and institutional investors of Koda Capital.
• Mocaverse is a decentralized metaverse that aims to empower users to create their own digital identities, accrue reputation, and earn and spend loyalty points. It will also serve as a platform for users to access a variety of blockchain-powered games, applications, and services.
• Mocaverse will soon launch Moca ID, a non-transferrable NFT collection that will allow users to create their own on-chain identities. Moca ID holders are expected to gain exclusive access to certain metaverse features and the opportunity to earn loyalty points through active engagement. 
• “In addition to empowering users to participate in a vibrant community that generates new economic opportunities, Mocaverse will also serve as the digital identity, reputation, and loyalty system for other decentralized organizations,” chairman and co-founder of Animoca Yat Siu said in the press release.

See related article: Korea Blockchain Week: diverging crypto paths for the US and Asia

https://forkast.news/headlines/ftx-sues-layerzero-labs/

FTX cryptocurrency exchange has filed a lawsuit against LayerZero Labs, the company behind cross-chain interoperability protocol LayerZero, to recover US$21.37 million that LayerZero allegedly withdrew from the exchange illegally prior to its Chapter 11 bankruptcy.

See related article: The rise and continuing fall of Sam Bankman-Fried: A step-by-step guide to his case so far

Fast facts

• FTX’s complaint alleges that LayerZero exploited Alameda Ventures, the venture capital arm of FTX’s sister company Alameda Research, by withdrawing money in the time of financial difficulties at FTX using insider knowledge.
• On top of the US$21 million recovery, FTX also seeks to cancel agreements made prior to the collapse.
• Alameda Ventures entered a series of transactions with LayerZero from January to May last year, including Alameda paying over US$70 million across two transactions to purchase a 4.92% stake in LayerZero. 
• In March, Alameda Ventures also paid another US$25 million for 100 million STG tokens at Alameda’s public auction. STG is the native token for StarGate Finance, a cross-chain liquidity platform built on LayerZero.
• In February 2022, LayerZero lent $45 million to Alameda Research under a promissory note bearing an annual interest rate of 8%. When FTX started to collapse in November 2022, LayerZero sought a deal for the return of its stake owned by Alameda in exchange for the forgiveness of the US$45 million loan. 
• Another deal was reached after the FTX collapse for LayerZero to purchase back 100 million STG tokens at a discount for US$10 million on Nov. 9, 2022, but this transaction was not completed as neither party transferred or paid for the tokens. 
• FTX’s filing described that this “fire-sale” capitalized on Alameda’s financial distress.
• FTX also wants to recoup US$13 million withdrawn by LayerZero’s former chief operating officer Ari Litan and US$6.65 million by LayerZero’s subsidiary Skip & Goose.
• Bryan Pellegrino, the co-founder and chief executive officer of LayerZero Labs, wrote on X social media that FTX suit is “filled with unsubstantiated claims,” explaining that the company has made continued efforts to address issues that have been ignored by FTX.
• FTX and its sister hedge fund Alameda Research filed for Chapter 11 bankruptcy protection on Nov. 1. Allegations of misappropriation of billions of dollars in client funds and other wrongdoings soon followed.
• Now led by corporate restructuring expert John J. Ray III, FTX is trying to sell, stake and hedge the exchange’s US$3 billion of crypto holdings. The Wall Street Journal reported in late June that the company is now mulling a revival.
• FTX is also trying to claw back millions of dollars it paid celebrity endorsers and sports teams prior to its bankruptcy. The list includes Shaquille O’Neal, tennis pro Naomi Osaka and the Miami Heats.

See related article: Former FTX exec Ryan Salame to forfeit US$1.5 billion after pleading guilty to charges

https://forkast.news/headlines/u-s-sec-appeal-ripple-court-decision/

The U.S. Securities and Exchange Commission (SEC) submitted a filing last Friday that pushed the court of the Southern District of New York to appeal its ruling on the agency’s lawsuit against Ripple Labs.

See related article: Former FTX exec Ryan Salame to forfeit US$1.5 billion after pleading guilty to charges

Fast facts

• The SEC requested the court review its prior ruling by Judge Analisa Torres, which posed “knotty legal problems,” according to the filing.
• In July, a summary judgment by Judge Torres ruled that Ripple’s XRP sales to institutional investors violated securities laws, but sales on public exchanges to retail investors did not.
• In the midst of the legal tussle, Ripple Labs announced last Friday that it will acquire Nevada-based crypto infrastructure startup Fortress Trust, giving Ripple a regulatory license in the state of Nevada. The terms of the deal were not disclosed.
• In the recent filing, the SEC stressed the need for legal clarification, claiming that there are two or more colliding opinions in U.S. courts on whether similar offerings pass the Howey test. The Howey test is a legal test that the SEC uses to determine whether a transaction qualifies as an investment contract and thus constitutes a financial security. 
• The SEC filed a motion to certify an interlocutory appeal against Ripple Labs on Aug. 18. 
• Ripple then filed an opposition to the SEC’s motion last week that SEC’s claims to appeal are not legally sufficient to warrant one. The regulator first sued Ripple for allegedly offering XRP as an unregistered security in December 2020.

See related article: U.S. CFTC charges three DeFi projects for illegal derivatives offerings

https://forkast.news/korea-blockchain-week-us-asia-regulation/

Taking place at the Shilla Hotel in central Seoul, the sixth annual Korea Blockchain Week’s main two-day conference, Impact, hosted 263 different blockchain companies, attracting over 6,000 participants eager to learn about the industry’s ups and downs in a year dominated by bear market sentiment.

Much of the 85 panel discussions focused on differences in the regulatory environments of the U.S. — traditionally the largest single crypto market and source of much of the industry’s funding — and Asia, where various jurisdictions including South Korea and Japan are creating a more crypto-friendly environment for developers and investors alike. 

Caroline Pham, a commissioner at U.S. regulator the Commodity Futures Trading Commission (CFTC), said during her fireside chat at KBW that she sees a unified approach between policymakers, regulators and the private sector in Asia that encourages innovation. 

“I think it’s funny that in the United States we have been so used to some of the tremendous successes that we’ve had in the tech sector that we take it for granted,” Pham said. “It’s like everything (in Asia) is 10 years ahead of where we are in the U.S.”

That is less related to technical skill or knowledge, she said, but “because there’s an openness to technology and to changing things.”

US scrutiny

Another U.S. regulator, the Securities and Exchange Commission (SEC), has stepped up scrutiny of the crypto industry this year based on the claim that most cryptocurrencies other than Bitcoin are securities. 

This logic has guided the agency’s lawsuits against a number of digital asset firms including software developer Ripple Labs, cryptocurrency exchange Coinbase Global and Paxos Trust, the issuer of the Binance USD (BUSD) stablecoin.

Most of the SEC’s lawsuits are yet to be settled as the cryptos-as-securities claim is disputed by the companies involved. In July, the U.S. court ruled that programmatic sales of Ripple’s XRP token do not qualify as securities offerings. The SEC filed an appeal against the ruling the following month, which Ripple then asked the court to deny.

Such delays in establishing crypto rules may hinder industry growth, former White House cybersecurity director Carole House said during a talk about the regulatory landscapes of the U.S. and Asia. House warned that “overly harsh” regulation of the crypto industry could stifle blockchain innovation in the U.S.

In contrast, Konstantin Richter, the CEO and founder of California-based blockchain infrastructure company Blockdaemon, said regulatory scrutiny in the U.S. is a long-term positive for the industry, despite current difficulties. 

“Ultimately, all the legal travails that we have here are going to lead to clarity, which is really all we want,” Richter said in a video interview prior to the event. 

Eastward movement

While opinions varied on U.S. crypto regulation, most conference participants agreed that the Asia region is taking significant regulatory strides.

“I really do think that the Asia-Pacific has been a powerhouse driver,” House said, highlighting that Japan’s regulatory framework has contributed to the global standard for anti-money laundering in crypto.

Sam Seo, the representative director of Klaytn Foundation, the public blockchain platform from the leading South Korean mobile platform Kakao, said he foresees a wave of companies moving to Asia to take advantage of the favorable conditions. 

Gemini, the cryptocurrency exchange founded by the Winklevoss brothers, announced in June that it is growing its headcount in Singapore to operate as a hub for expansion in the Asia-Pacific. Seo cited Klaytn’s new partnership with Luxembourg-based asset tokenization platform Tokeny as another example.

“[Tokeny has] been operating their business for quite a long time, but they were mostly focused in the U.S. market or the Europe market. They are now looking at the Asia market,” said Seo, adding that he believes this is the “beginning of a bigger trend.” 

Dominic Jang, head of business development at Singapore-based blockchain game platform Oasys, said industry movement eastward to Asia is particularly apparent in the Web3 gaming sector. 

“We’re seeing more and more U.S. companies doing blockchain gaming seeking [the Asian market],” Jang said, adding that Asian audiences provide a growth market missing in the U.S. due to unfavorable regulations. 

Regulatory clarity

Ryo Matsubara, a Japanese national and director of Oasys, said that regulatory clarity plays a big role in attracting business to Asia, citing the regulatory situation in Japan as an example. 

He said that after the high profile hacks of the Mt.Gox and Coincheck crypto exchanges in 2014 and 2018 respectively, Japanese regulators established a strict set of criteria for cryptocurrencies. 

“Under Japanese rules, crypto is crypto, not a security,” Matusbara said. “So making the [clear] definition of crypto is very important.”

In the case of South Korea, the country’s top financial regulator, the Financial Services Commission, announced a bill in July to amend securities regulations in a way that accommodates security token offerings, or STOs. 

While the bill has not yet received approval by legislators, major financial institutions are already looking to expand into the digital asset industry. On Aug. 30, South Korea’s financial leaders Woori Bank, Samsung Securities and SK Securities formed an alliance for cooperation on developing security tokens. 

Hong Kong also successfully rolled out its own crypto licensing regime earlier this year, positioning itself as a digital asset regulatory sandbox for China.

In Southeast Asia, Singapore and Thailand ramped up crypto user protection regulations in July. Singapore now mandates that crypto firms must hold customer assets in third-party trusts, while Thai authorities introduced bans on crypto lending and staking services. Despite the tightening of restrictions, the new rules are seen as necessary for industry growth in the two countries.

Move over, USA?

While SEC boss Gary Gensler’s term ends in June 2026, he has been on the end of calls to resign from U.S. crypto advocates who consider him hostile to the industry. #FireGaryGensler was trending on X, formerly Twitter, on Aug. 30 after a U.S. district court ruled against the SEC’s denial of Grayscale Investment’s Bitcoin exchange-traded fund proposal on the grounds it was “arbitrary.”

“His voice is quite the opposite to that of Web3 and crypto projects,” Seo said, adding that Gensler’s words have “a big impact” on the industry and its perception among the public.

Asia’s chance of challenging the U.S. to become the center of the crypto world therefore “depends on who will be the successor” to Gensler at the SEC, Seo said. If the current period of regulatory scrutiny continues much longer, he added, it could drive the nation’s talent to look for friendlier locations in Asia or Europe.

The Klaytn director concluded by saying that blockchain innovation is key to Asia’s success. While U.S. financial markets are strong, he said, Asia is far more populous and can take the reins as the world’s leader in Web3 — if it finds the right ways to put blockchain tech to use.

https://forkast.news/headlines/former-ftx-ryan-salame-pleads-guilty/

Former FTX top executive Ryan Salame pleaded guilty Thursday in New York to two criminal charges related to the collapse of the cryptocurrency exchange last November. Salame has agreed to forfeit approximately US$1.5 billion, including two real estate properties and a Porsche automobile, according to The New York Times.

See related article: Sam Bankman-Fried’s lawyers granted unlimited prison visits; FTX tries to sell crypto holdings

Fast facts

• Salame, the former co-chief executive of FTX’s Bahamas-based subsidiary FTX Digital Markets, pleaded guilty to charges of conspiracy to operate unlicensed money transmitting business and conspiracy to make unlawful political contributions, according to the U.S. Attorney’s Office in the Southern District of New York.
• Salame is the fourth FTX top-level associate to plead guilty to charges involved with FTX, following Nishad Singh, Gary Wang and Caroline Ellison. 
• The court trial for FTX founder Sam Bankman-Fried is expected to take place on Oct. 3, over his alleged multibillion-dollar wire and securities fraud charges.
• Bankman-Fried was jailed Aug. 11 for witness tampering, following his arrest in the Bahamas in December 2022. He maintains his innocence and has pleaded not guilty to all 13 charges brought against him.
• FTX and its sister hedge fund Alameda Research filed for Chapter 11 bankruptcy protection on Nov. 1. Allegations of misappropriation of billions of dollars in client funds and other wrongdoings soon followed.
• Now led by corporate restructuring expert John J. Ray III, FTX is trying to sell, stake and hedge the exchange’s US$3 billion of crypto holdings. The Wall Street Journal reported in late June that the company is now mulling a revival.

See related article: Why FTX deserves a second chance

https://forkast.news/headlines/north-korean-hackers-stake-com-fbi/

North Korea-backed hacker organization Lazarus Group was behind the US$41 million hack of online crypto gambling platform Stake.com on Monday, the U.S. Federal Bureau of Investigation (FBI) confirmed in a statement Wednesday.

See related article: Tornado Cash founders charged with money laundering crypto, including proceeds from North Korean heists

Fast facts

• The stolen crypto assets were moved from Stake.com’s Ethereum, Binance Smart Chain (BSC), and Polygon networks to 33 different addresses, according to the FBI.
• The FBI said hackers from the Democratic People’s Republic of Korea (DPRK) have stolen over US$200 million of digital currencies this year, including funds siphoned off Alphapo and CoinsPaid crypto platforms earlier this year.
• U.S. authorities had said that funds stolen by DPRK-backed cyber actors are used to support North Korea’s weapons programs. 
• Lazarus Group previously used the now-sanctioned Tornado Cash to move illicit funds. But after the sanctions, Lazarus utilized chain-hopping to launder some of the funds stolen from Ronin, according to Chainalysis.
• Meanwhile, the U.S., Japan and South Korea on Aug. 18 agreed to establish a trilateral working group to tackle North Korean cyberattacks as early as next month, according to South Korea’s KBS News.

See related article: North Korean hackers move 41,000 ETH stolen from Harmony Bridge attack

https://forkast.news/headlines/cftc-charges-defi-illegal-derivatives/

The Commodities Futures Trading Commission (CFTC) charged three U.S.-based decentralized finance (DeFi) protocols – Opyn, ZeroEx and Deridex – on Thursday for omitting necessary registrations as a merchant and illegal offerings of digital asset commodities.

See related article: US response to crypto is like ‘deer caught in headlights,’ says ex-CFTC chair

Fast facts

• CFTC accused the projects of illegally offering “leveraged and margined” digital asset commodity transactions. Deridex and Opyn are charged with failing to register as a swap execution facility or a designated contract market, and as a futures commission merchant, according to the CFTC release.
• The commission ordered Opyn, ZeroEx, and Deridex to pay penalties of US$250,000, US$200,000, and US$100,000, respectively, along with a cease and desist of operations in violation with CFTC rules.
• The projects have agreed to the penalties to settle the charges.
• “Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts,” said CFTC director of enforcement Ian McGinley in the press release. 
• “They do not. The DeFi space may be novel, complex, and evolving, but the Division of Enforcement will continue to evolve with it and aggressively pursue those who operate unregistered platforms that allow U.S. persons to trade digital asset derivatives,” McGinley said.

See related article: Binance, Zhao sued by CFTC for alleged regulatory violations

https://forkast.news/headlines/us-regulation-blockchain-innovation/

Blockchain innovation in the U.S. could suffer from over-regulation of the crypto industry, former White House director of cybersecurity Carole House said during a panel discussion Tuesday at Korea Blockchain Week in Seoul.

See related article: SEC delays verdict on BlackRock’s ETF application; Will Bitcoin ETFs see light of day?

Fast facts

• House said that “overly harsh” crypto regulation in the U.S. could work to prevent blockchain’s development as a foundation for key infrastructure. High profile cases of fraud in the crypto industry has created a sense that the underlying technology is at fault when it is actually “a fault of people and businesses,” she said.
• The cybersecurity expert said that she sees “great potential” in blockchain technology in areas such as identity verification and supply chain transparency. She said that the development of use cases in key infrastructure is a separate issue to blockchain’s use in finance, where much of the majority of regulatory scrutiny is aimed. Regulators should treat the two fields separately, she added.
• House said that the U.S. government is trying to drive competitiveness in blockchain technology — a contrast to what many see as an attempt to constrain the industry by regulators including the Securities and Exchange Commission (SEC) led by Gary Gensler. 
• The SEC’s clampdown on the crypto industry is driving a lot of headlines. But House said that the current period of increased scrutiny has been a long time in the making. “Enforcement actions actually take many years to come to fruition. So a lot of this effort that you’re seeing now culminating in enforcement actions is because of something that’s been a priority for many years,” House said. 
• When discussing U.S. regulatory action, House drew comparisons to Asia, where various jurisdictions including Hong Kong, Singapore and Japan have adopted comparatively pro-crypto regulatory frameworks over the past year.
• “I really do think that the Asia-Pacific whole region has been a powerhouse driver [in crypto regulations],” said House. As an example, she highlighted Japan’s regulatory framework, which she said has contributed to creating global anti-money laundering standards.
• House was formerly the senior policy officer for cyber and emerging technologies at the Financial Crimes Enforcement Network (FinCEN). She was director of cybersecurity and secure digital innovation at the White House from 2021 to 2022.

See related article: Financial Stability Board recommends stricter global crypto regulation after year of industry blow-ups

https://forkast.news/headlines/south-koreas-hana-bank-bitgo/

KEB Hana Bank, one of South Korea’s largest financial institutions, will offer digital asset custody services from the latter half of 2024. The bank, which has total assets of US$448 billion, made the announcement Tuesday at Korea Blockchain Week in Seoul. It will partner with digital asset custody custody provider BitGo Trust Company on the project.

See related article: Why Asia will emerge as the global hub for Web3 gaming: Opinion

Fast facts

• Hana’s new digital asset custody services will operate using BitGo’s blockchain security technology. The two companies did not provide any further information on the services the partnership will provide.
• “The partnership is expected to be an important turning point in raising the standards of the domestic digital asset market to a global level and encouraging institutional participation in the market,” the joint press release from Hana and BitGo said.
• Hana is one of South Korea’s top five banking institutions, having earned a net profit of over 3.16 trillion Korean won (US$2.4 billion) last year.
• Digital asset custodian BitGo has clients, including Nike, in over 50 countries. The California-based company said in the press release that it has decided to expand in South Korea given the country’s favorable regulatory environment.
• BitGo is also launching an office in South Korea in the latter half of 2024, after preparing the necessary licenses under local regulations. Last month, the company completed a US$100 million Series C funding round, with its valuation standing at US$1.75 billion. 
• In July, South Korea’s Financial Services Commission announced that it will push to amend the electronic securities laws to include blockchain-powered security tokens within its regulatory framework.

See related article: South Korea issues guideline on cryptocurrencies as securities tokens ahead of planned legalization

https://forkast.news/headlines/china-court-virtual-asset-legal-properties/

Virtual assets remain legal property protected by law in China, according to a Friday report from People’s Court Daily, a daily newspaper managed and issued by the Supreme People’s Court of China.

See related article: If Chinese crypto holders sneeze, will global markets catch a cold?

Fast facts

• The report, authored by a People’s Court in the southeastern Fujian province, said that virtual assets have economic attributes and should be classified as property.
• The People’s Courts of the People’s Republic of China serve as the state’s judicial bodies that independently exercise judicial power, free from interference by administrative entities, according to the Chinese constitution. 
• Virtual assets held by individuals should be considered legal and protected by law, the People’s Court Daily report said.
• The report further stated that crimes involving virtual assets, which are challenging for authorities to confiscate or restore, should be addressed using both criminal and civil laws to safeguard individual property rights and the broader public interest.
• Despite China’s blanket ban on cryptocurrencies, local courts have issued rulings that recognize virtual assets as legal properties. Last September, a Beijing court declared that no laws, administrative regulations, or departmental rules deny the protection of cryptocurrency as a form of virtual property.
• Cryptocurrency usage appears to remain prevalent in China. In August, the Wall Street Journal reported that Binance users in China traded about US$90 billion in crypto assets in May, which accounted for roughly 20% of the platform’s global volume, excluding trades by some major traders.

See related article: China is Binance’s largest market with US$90 billion despite crypto ban: WSJ

https://forkast.news/sec-blackrock-bitcoin-etf-grayscale-fidelity/

The U.S. Securities and Exchange Commission (SEC) on Thursday postponed its decisions on seven Bitcoin exchange-traded fund (ETF) proposals, including one submitted by BlackRock, the world’s largest asset manager. 

Seven firms — BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise and Valkyrie Digital Assets — published ETF applications in the Federal Register on July 19. The SEC was scheduled to rule on all seven applications by Sept. 4. However, the regulator postponed by 45 days meaning the seven firms will now have to wait until mid-October for a decision. 

“We fully expected delays on this round of spot Bitcoin ETF filings. Would have been a shock if they were approved this week,” James Seyffart, research analyst at Bloomberg Intelligence, tweeted on Friday.

To the frustration of those in the crypto industry, the SEC can delay its verdict on ETF proposals for a maximum of 240 days, or about six months. The federal agency had already delayed its deadline on the proposal from Cathie Wood’s Ark Investment Management on Aug 11. 

The SEC’s latest decision comes days after the District of Columbia Court of Appeals sided with Grayscale Investments, the manager of the world’s largest Bitcoin fund, the Grayscale Bitcoin Trust (GBTC). The court overturned an earlier SEC decision preventing GBTC’s conversion into a spot Bitcoin ETF. 

District Court Judge Neomi Rao called the SEC’s denial of Grayscale’s proposal “arbitrary” and “capricious” in the review of the petition because the agency failed to clearly explain what distinguishes spot Bitcoin ETFs from already-listed futures ETFs. 

Grayscale argued in an October 2022 legal update posted on its website that the SEC did not provide clear explanations for the rejection, violating the Administrative Procedure Act. The company also stated that the SEC decision was inconsistent with its approvals of Bitcoin futures ETFs.

Despite the SEC postponing the latest series of applications, Nigel Green, founder of financial management group deVere, said in a statement that Grayscale’s victory now makes spot Bitcoin ETFs in the U.S. an “inevitability.”

“The court’s decision destroys the SEC’s central argument for rejecting every spot Bitcoin ETF over the last few years. This win paves the way for Bitcoin ETFs,” Green said.

Georgetown University’s McDonough School of Business professor James Angel said before the court’s decision that the SEC may even want to lose the Grayscale case, forcing them to allow all the ETF applications currently pending. 

“This would take the blame away from the SEC if and when Bitcoin has another crash or another crypto ice age,” Angel said.

Bitcoin’s price rollercoaster pause

The news of Grayscale’s win triggered a surge in crypto prices. Bitcoin grew 7% shortly after the news to above US$28,000 on Tuesday. But the SEC’s subsequent delay in the seven other cases Thursday poured cold water on the sector, triggering a downturn to below US$26,000. Bitcoin fell 4.62% in the past 24 hours to US$25,988 at 3:45 p.m. on Friday in Hong Kong. 

The sharp price swings reflect the industry’s interest in Bitcoin ETFs. Ric Edelman, founder of the U.S.-based think tank Digital Assets Council of Financial Professionals, said that a green light from the SEC, if given, would cause an even greater upswing in crypto prices.

“Around half of the nation’s financial advisors in the United States personally own Bitcoin, but only 12% are recommending Bitcoin to their clients,” said Edelman. “And the primary reason that advisors are not recommending Bitcoin is because there isn’t an ETF.”

“Those advisors manage about US$8 trillion in investor assets,” he added.

However, Georgetown’s James Angel said that a spot Bitcoin ETF win will not be a long-term growth factor for the crypto market.

“Investors already have an almost identical product with the futures-backed ETF, so I don’t see a big long-term impact,” said Angel. “There will clearly be an emotional short-term rally when the approval comes out, but that will get lost in the noise in the long-term.” 

Sean Stein Smith, professor of economics at the City University of New York and founder of the Institute for Blockchain & Cryptoasset Research, said that the approval of spot Bitcoin ETFs will have a positive impact on the wider crypto industry.

“[Spot Bitcoin ETFs] will open the proverbial door for more product approvals and launches, including those that are related to Bitcoin as well as other crypto assets,” Smith added.

So when will investors have access to spot Bitcoin ETFs from investment giants like BlackRock, Fidelity and Invesco? 

Taking account of different possibilities and factors, it is more likely we’ll see a batch of ETFs approved in the early half of next year, said Julian Klymochko, founder and CEO of Calgary-based investment solutions firm Accelerate. 

“I think a spot Bitcoin ETF in the U.S. is a 2024 story. When in 2024 they’ll launch, it’s to be seen, but I wouldn’t be surprised to see it in the first or second quarter,” said Klymochko. “I think that things are going to be moving quickly. There are many, many companies that have applied for a spot Bitcoin ETF, so it’s certainly going to be a battle.” 

Crypto wild west: SEC sheriff’s rules

The series of spot Bitcoin ETF applications from major U.S. firms was submitted in the midst of an ongoing crypto crackdown. Increased scrutiny over the industry by the SEC is based on the regulator’s claim that most cryptocurrencies other than Bitcoin are securities. The federal agency sued Coinbase and Binance.US in July on the basis that the two exchanges offer unregistered securities in the form of cryptocurrencies.

More recently, the SEC made its first enforcement action against non-fungible tokens (NFTs), charging media company Impact Theory with offering unregistered securities in the form of NFTs on Monday.

SEC Chair Gary Gensler, who has emerged as the crypto industry’s main bogeyman, said at a Senate Appropriations Financial Services subcommittee hearing in Washington D.C. in July that the “Wild West” of crypto is “rife with noncompliance.” 

Gustavo Schwenkler, professor of finance at Santa Clara University, said that Gensler and the SEC have reason to be concerned.

“The existing ETFs track derivatives that are traded on strictly regulated derivatives exchanges. There are not that many derivatives exchanges that are closely monitored by the regulator,” said Schwenkler. “A spot Bitcoin ETF would track the Bitcoin price that is available across global crypto exchanges. There are a lot of them and many are not well regulated.”

However, Megan Enright, spokesperson for Swiss digital asset manager 21Shares, said that “material changes” in the market over the past year or so mean that it is now better prepared for ETFs than it was in the past.

“The market has matured, there is additional data supporting the efficiency of these markets and there are new surveillance sharing agreements that are being established between major crypto markets and traditional exchanges,” Enright added. 

In April, 21Shares refiled its application for a spot Bitcoin ETF in the U.S. with its partner, Ark Invest.

https://forkast.news/bitcoin-ether-death-cross-us-jobs-report/

Bitcoin, Ether and most top ten non-stablecoin cryptocurrencies dropped Friday morning in Asia. At a touch above US$26,000, Bitcoin has traced back most of the gains triggered by Tuesday’s favorable U.S. court ruling for Grayscale Investments in its Bitcoin ETF case against the SEC. Equity futures in the U.S. were little changed following a mixed session Thursday. The personal consumption expenditures (PCE) index moved higher as consumers continue to spend. Investors expect today’s U.S. payroll report for August to shed more light on coming interest rate policy.

Cryptos down as SEC delays more ETF decisions

Bitcoin dropped 4.42% over the last 24 hours to US$26,042.84 as of 07:00 a.m. in Hong Kong. The token is down 0.26% for the week, according to CoinMarketCap data. 

Bitcoin’s value fell along with most other top ten non-stablecoin cryptocurrencies. The declines followed the U.S. Securities and Exchange Commission announcement Thursday that it will delay seven spot Bitcoin exchange traded fund applications until October. Applications by some of the world’s largest asset managers including BlackRock, WisdomTree and VanEck are subject to the delay.

Ether dipped 3.15% to US$1,648.76 over the past 24 hours for a weekly loss of 0.33%.

Ether market data shows the token is on track to form a so-called “death cross” — a sign of the bearish outlook in the ether options market. The cross, which occurs when the short-term average falls below the long-term trend, is generally a sign of further losses ahead. Currently, the short-term 50-day average stands at 1808.3, while the 200-day average is at 1802.9, according to TradingView.

Most other top ten non-stablecoin cryptos posted losses, with Solana’s SOL leading the losers. It dipped 5.07% to US$19.81, its lowest level in over six weeks. On Monday, Clockwork — a Solana-based automation network for smart contracts — shut down. Its founder Nick Garfield said he saw “limited commercial upside” in the project.

Meanwhile, a U.S. court has dismissed a class action lawsuit filed against a group of five companies including decentralized trading platform Uniswap Labs. Plaintiffs claimed they were victims of a rugpull involving scam tokens on the Uniswap cryptocurrency exchange and are entitled to compensation.

The court ruled that the defendants are not responsible for those losses. Presiding Judge Katherine Polk Failla said “due to the Protocol’s decentralized nature, the identities of the scam token issuers are basically unknown and unknowable.”

Crypto commentators interpret the ruling as a victory for decentrailized finance with wide reaching implications for the industry. 

“I believe that what happened in the case against Uniswap Labs could be the first steps in clarifying the legal and regulatory environment for DeFi applications and could make investors’ concerns about sudden lawsuits and actions by regulators less and make them more predictable,” wrote Samer Hasn, market analyst for online brokerage XS.com. 

“On the other hand, this measure, and other similar possible measures, if taken in the future, may restrict investors’ confidence in these applications due to the inability to regulate them and enforce the law on them,” Hasn added. 

The total crypto market capitalization fell 3.46% to US$1.05 trillion, while trading volume gained 16.61% to US$37.31 billion.

https://forkast.news/cryptos-down-as-grayscale-etf-news-loses-shine/

Bitcoin, Ether and most other top ten non-stablecoin cryptocurrencies dipped Thursday morning in Asia. The market lost some of the ground it made up Wednesday following a favorable U.S. court ruling for Grayscale Investments in its Bitcoin ETF case against the U.S. Securities and Exchange Commission (SEC). Elsewhere, U.S. equity futures were trading flat following four straight days of advances across the three major indexes. Weaker than expected economic data has raised hopes of another pause for interest rate hikes. Investors now await the release of U.S. jobs data Friday.

Some way to go

Bitcoin dropped 1.35% over the last 24 hours to US$27,248.34 as of 06:55 a.m. in Hong Kong. The token is up 3.04% for the week, according to CoinMarketCap data. The world’s leading cryptocurrency briefly rose above US$28,000 during the early hours of Thursday morning. 

Ether also posted losses. It fell 1.57% to US$1,702.62 over the past 24 hours for a 1.60% weekly gain. All other top ten non-stablecoin cryptos posted losses, with Solana’s SOL leading the losers with a dip of 4.28%. Toncoin was the only top ten crypto to post a gain. It rose 0.28% over the past 24 hours.

The losses across most of the market followed a day of gains Wednesday on the back of a favorable U.S. court ruling for Grayscale Investments in its ongoing legal dispute with the SEC.

The Connecticut-based digital asset management firm filed a lawsuit against the SEC in June 2022 following the rejection of the company’s proposal to convert its GBTC Bitcoin fund into a spot Bitcoin exchange-traded fund (ETF). A U.S. appeals court overturned the SEC’s refusal Tuesday, opening up a potential avenue for approval. 

In light of the news, Nigel Green, founder of financial management group deVere, said spot Bitcoin ETFs are now an “inevitability” that will cause another bull run in the market. “The court’s decision destroys the SEC’s central argument for rejecting every spot Bitcoin ETF over the last few years. This win paves the way for Bitcoin ETFs,” he said in an emailed comment.

“ETFs typically involve the purchase of the underlying asset by the fund managers. If Bitcoin ETFs follow this structure, it could create a substantial demand for actual Bitcoins to back the ETF shares,” Green said. 

Bitcoin’s next halving event is expected to take place in April 2024. The halving event will see the amount of new Bitcoin issued cut in half, increasing its scarcity. Increased demand caused by ETF approval coupled with the limited supply of Bitcoin will lead to a surge in the token’s price, Green said.

Matteo Greco, a research analyst at digital asset investment firm Fineqia International, took a less bullish view. He pointed out that Grayscale’s favorable court ruling is just one part of an application process that is still incomplete. 

“The decision of the court is of course important but doesn’t change anything for now,” Greco said in an emailed statement. 

“Grayscale obtained the chance of seeing their filing re-evaluated by the SEC as the causes of rejection did not seem fair to the judge,” Greco continued. “It doesn’t mean that now Grayscale will be 100% able to list a spot Bitcoin ETF, nor that this will happen in the future.”

Other major U.S. financial institutions including BlackRock, Fidelity, Invesco and WisdomTree have filed their own ETF applications. The SEC is scheduled to rule on each of the applications this week. However, the regulator delayed a decision on Ark Investment Managament’s ETF application in early August and could do so again. 

The total crypto market capitalization fell 1.41% to US$1.09 trillion, and trading volume dropped 38.98% to US$32.02 billion.

https://forkast.news/crypto-green-after-grayscale-scores-sec-win/

It was a morning of gains in Asia. That followed Tuesday’s favorable U.S. court ruling for Grayscale Investments in its Bitcoin ETF case against the U.S. Securities and Exchange Commission (SEC). Bitcoin, Ether and all other top 10 non-stablecoin cryptocurrencies rose, while Toncoin recorded double-digit growth. The Forkast 500 NFT Index fell as traders processed the latest SEC charges brought against the crypto industry for securities violations — this time against an NFT project operated by media company Impact Theory. U.S. equity futures traded flat after Tuesday’s gains. Investors now await the release of key economic data later in the week.

Grayscale bounce

Bitcoin gained 6.09% for the last 24 hours to US$27,625.04 as of 06:45 a.m. in Hong Kong. The token is up 7.02% for the week, according to CoinMarketCap data. The world’s leading cryptocurrency had been trading under the US$27,000 mark since Aug. 18 as downbeat macroeconomic developments in the U.S. and China took a toll on the wider crypto market. 

Ether also posted gains. It rose 4.92% to US$1,731.09 for a 6.87% weekly gain. 

All other top 10 non-stablecoin cryptocurrencies were in green as the market reacted to news of a victory for Grayscale Investments in its ongoing legal dispute with the U.S. Securities and Exchange Commission.

On Tuesday, the District of Columbia Court of Appeals overturned the SEC’s earlier refusal to allow the company’s Grayscale Bitcoin Trust, known by its ticker GBTC, to become an exchange-traded fund (ETF).

“Despite the inevitable SEC appeal, to our mind there is no doubt now, spot BTC ETFs are coming to the U.S.,” said Tim Bevan, chief executive officer at crypto investment firm ETC Group, in an emailed statement. Bevan predicted that a bulk approval of applications from other major financial institutions — including BlackRock, Fidelity and WisdomTree — is now in the cards for the first quarter of fiscal 2024.

Grayscale first sued the SEC in June, 2022. The Stamford-based digital asset manager said that the regulator failed to provide clear explanations for the rejection of its ETF application, violating the Administrative Procedure Act. The company added that the SEC’s refusal was inconsistent with its approach to other Bitcoin futures ETF applications.

“The level of pent up institutional and retail demand in the U.S. is significant and we expect this to have a positive impact on the price of Bitcoin as can be seen from today’s price reaction,” wrote Bevans. The positive impact will be felt beyond price, he added.

“The broader signal this sends to the market is one of legitimacy, which is hugely relevant in terms of institutional adoption and other global jurisdictions following suit,” Bevans said.

Among the top 10, Toncoin, the native token of proof-of-stake blockchain TON, led the leaders. It surged 14.24% in the last 24 hours to $1.72 and a weekly gain of 27.20%. 

The Telegram messaging application introduced the TON blockchain in 2018. Telegram then severed ties with the project in 2020 due to increasing regulatory pressure from the SEC. The blockchain said it has seen a 102% increase in developer involvement within the last year. Telegram also launched its Wallet Pay service, which allows users to pay merchants directly on the app using crypto, in July. The service supports Bitcoin, Tether stablecoin and Toncoin payments.

The total crypto market capitalization rose 4.73% to US$1.1 trillion, while trading volume surged 116.20% to US$52.34 billion.