https://dailycoin.com/ftx-japan-delivers-on-promise-to-re-open-withdrawals/

• Four months after the collapse of crypto exchange FTX, customers of the Japanese branch can withdraw funds again.
• FTX Japan has posted weekly updates about its plan to return user assets.
• User funds were kept in cold storage due to regulatory requirements in Japan.

FTX users were left without access to their funds when crypto exchange FTX collapsed suddenly in November last year. The financial fiasco rendered the exchange unable to cover withdrawals as users scrambled to get their money back. 

For Japanese clients of the bankrupt exchange, there is still hope. An FTX Japan (FTX JP) announcement made on Monday, February 20th, indicated that the exchange would allow withdrawal of both fiat and crypto, beginning at noon (GMT+9) on Tuesday, 21st.

The return of user withdrawals honors the promise made by FTX Japan in a blog post dated December 29, 2022. The statement outlined a roadmap by which the exchange intended to make customers whole again, and disclosed that user funds were being held safe in a cold wallet. The return of assets will be facilitated via direct withdrawal from Liquid, a sister exchange owned by FTX.

Japan’s strict regulation of the cryptocurrency sector seems to have played a significant role in paving the way for withdrawals to resume. The country requires exchanges to register with the Financial Services Agency, set aside ample capital reserves, and to separate customer and exchange assets.

An Ongoing Process

Leading up to Tuesday’s resumption of withdrawals, customers registered with FTX Japan have been kept informed since the collapse of the parent company. 

On December 5, 2022, FTX Japan explained that the sudden collapse of the exchange had left them without access to their website and platform. After regaining control, FTX Japan began shaping its plan to provide users with access to their funds again. The December 29 blog outlined three milestones, with fund withdrawals as the final step.

• Milestone 1 called for eligible FTX Japan users to create an account with Liquid. 
• Milestone 2 asked users to log into Liquid to confirm their balances and transfer assets to the FTX platform.
• Milestone 3, the commencement of withdrawals, has now been reached, and those affected by FTX’s collapse will finally be able to retrieve their funds. 

The Fall of Bankman-Fried

The downfall of FTX arose when it secretly loaned around $10 billion in customer funds to sister company Alameda Research, which then lost the money attempting to defend its trading positions. 

In the wake of the massive exchange’s collapse, CEO Sam Bankman-Fried had one of the largest falls from grace in crypto history. The FTX Founder, who was often regarded as a philanthropist and tech revolutionary before his arrest on December 12, 2022, said he hoped to start a new business to help pay back the victims of his collapsed business.

Bankman-Fried’s spokesman claims that the CEO was reportedly “happy to see that the Japanese exchange is moving forward, and continues to maintain that the US entity can and should do the same as soon as possible.”

On the Flipside

• A third member of FTX’s senior management has pleaded guilty, while Bankman-Fried himself maintains that he is not guilty. Nishad Singh, former head of engineering, joins former Alameda chief Caroline Ellison and FTX Co-Founder Gary Wang in admitting culpability.

Why You Should Care

Japan’s requirements for exchanges to set aside capital reserves and separate customer and exchange assets saved customer funds held in FTX Japan.

Other nations, like Hong Kong and the UK, are busy building out their crypto framework, which is expected to protect users from similar collapses.

https://dailycoin.com/hong-kong-regulators-welcome-crypto-platforms-with-new-laws/

• Hong Kong’s Securities and Futures Commission is mulling over new regulations to enable platforms operating in the region to offer services to retail investors.
• The region has changed its stance since proposing a ban on retail trading in 2021 as it looks to become a global crypto hub.
• Crypto firms must follow rules around token listing, smart contract audits, and limiting trader exposure.

Global crypto regulations are often fragmented, confusing, and unclear, but national jurisdictions are increasingly looking to change this with friendly legal frameworks aimed at enticing businesses. 

Hong Kong is one such territory; its Securities and Futures Commission (SFC) has published a proposal for the legislation of crypto trading platforms under a new licensing regime set to take effect on June 1, 2023. 

The SFC calls for public comment on whether it should allow licensed platforms to serve retail investors. By clarifying regional operating practices, the legislation aims to attract crypto exchanges and related companies to Hong Kong.

Firmer Regulations for Retail Consumer Protection 

Many of the proposed licensing regime’s requirements are geared toward retail consumer protection, obligating platforms to follow a number of regulations and requirements. Under these guidelines, crypto firms must compile client risk profiles and set appropriate limits to ensure that exposure is reasonable. They must also satisfy the SFC’s “eligible large-cap virtual assets” criteria when listing tokens.

Crypto firms must further perform smart contract audits on tokens to assess security concerns. The listing of tokens that could be defined as securities will also be prohibited under the law. Additionally, exchanges will be required to perform due diligence to ensure that listed tokens are not centralized or controlled by a small number of individuals. 

A Change in Stance

The SFC’s decision to allow retail investors access to crypto under this regime indicates a change in stance since the restrictions imposed on the industry in 2021.

Announced on May 21, 2021, the SFC’s tightened controls on virtual asset service providers (VASP) were undertaken to align with anti-money-laundering (AML) guidance from the Financial Action Task Force (FATF). The indications from the initial framework outlined by the SFC provisioned that VASPs could serve only professional traders. 

The latest framework, proposed to come into effect on June 1, 2023, and now available for public comment, balances enforcing AML guidance and empowering crypto platforms to offer services to retail investors in the region.

On the Flipside

• The United Kingdom recently released its own paper to put the country at the forefront of crypto without hardline controls. His Majesty’s Treasury has explicitly stated it plans “to make UK a global crypto asset technology hub.”

Why You Should Care

The lack of crypto regulation has far-reaching implications for the growth and adoption of the technology. American credit rating agency Fitch Ratings explained:

“The lack of clear crypto regulatory standards across jurisdictions increases the risk of fraud and market manipulation amongst crypto players while limiting widespread institutional participation.”

Jurisdictions like Hong Kong and the UK are working to build frameworks that stamp out fraud and other illicit technology uses while still empowering innovation.