Kenanga Investment Bank Berhad, a major investment bank in Malaysia, on Wednesday announced its plans to launch a crypto-friendly wallet and trading application. Reportedly, it is planning to launch the app in early 2023.
Kenanga said it has partnered with China’s tech giant Ant Group to enable the launch of Malaysia’s first “SuperApp,” which will include crypto trading, e-wallets and portfolio management.
Ant Group is a major China-based fintech firm that develops online payment platforms – it is the company that owns the world’s largest mobile payment platform Alipay.
Kenanga has signed an MOU (memorandum of understanding) with Ant to jointly create Malaysia’s wealth application known as a super app.
Based on the terms of the deal, Ant’s digital technology unit will provide Kenanga with mPaaS, a mobile development platform originating from AliPay App.
The super app is designed to revolutionize how consumers manage wealth in Malaysia by integrating diverse financial services like a digital wallet, stock trading, crypto trading, foreign currency exchange, digital investment management, and others into a single platform accessible to users online.
Kenanga is reportedly planning to launch the app in early 2023.
Datuk Chay Wai Leong, Kenanga Group managing director, talked about the development: “We look forward to not only unifying a broad spectrum of financial offerings under one roof. But more importantly, to make wealth creation more accessible by democratizing financial services for the millions of Malaysians.”
Leong said Kenanga began experimenting with digital financial services five years ago. Launching the new application would therefore bring the company’s growth to the next level.
Kenanga has been an active player in the crypto industry. In February last year, the bank invested in digital asset exchange (DAX) operator Tokenize Technology M (Tokenize Malaysia) to accelerate the buyers’ digital agenda. Tokenize Malaysia operates Tokenize Xchange, which allows trading cryptocurrencies such as Bitcoin and Ethereum.
In April 2016, Kenanga partnered with the crypto-friendly Japanese retailer Rakuten and therefore launched Malaysia’s local online stock trading platform Rakuten Trade which currently allows customers to invest in Malaysia stocks.
Promoting Financial Inclusion
Over the past year, cryptocurrency adoption in Malaysia has significantly grown, with about RM21 billion (USD$4.68 billion) in digital assets traded in the country in 2021. According to the Securities Commission Malaysia (SC), the agency responsible for oversight and regulation of the Malaysian financial services industry.
Although 55% of the country’s adult population is still underbanked and unbanked, 18% of adult Malaysians own cryptocurrencies, ahead of the global ownership average.
It is not hard to see the popularity of digital assets, especially among the more tech-savvy. Digital currencies provide the financially underserved with access to the financial and credit services they need.
This explains the reason why major local banks like Kenanga are moving into cryptocurrency trading as part of default banking offerings.
With the mobile app, Kenanga is set to enable consumers to easily start crypto and other investment trading in a real-time and borderless manner via the super mobile app.
Such ease-of-use combined with the promise of massive gains, more equitable distribution of assets, and the low fees involved in opening and trading such investment assets, is very appealing.
Ant Group, a majority-owned fintech firm of Alibaba Group Holdings has launched ANEXT, a digital bank following a nod from the Monetary Authority of Singapore (MAS) earlier this month.
The move comes off as Ant Group’s most ambitious off-shore expansion move after its failed IPO attempts back in 2020.
ANEXT will be focused on Small and Medium Enterprises (SMEs), particularly those focused on local and regional trades. The startup has inked a 2-year partnership with Proxtera, an entity supported by MAS, the Infocomm Media Development Authority (IMDA), and the private sector entities to create an open framework for financial institutions.
“We believe it’s time to offer the next generation of financial services that are accessible and effortless for growing businesses. Amid rapid acceleration in the digital economy, business models are changing and pivoting to become digital-first, if not adopting a hybrid model. Financial services have to evolve and be where SMEs are doing their businesses digitally,” said Ms. Toh Su Mei, a banking veteran who will be leading ANEXT as its Chief Executive Officer.
Singapore is opening up for a whole lot of financial innovation and the penetration of Ant Group is a testament to this broad embrace.
The country’s apex bank had also previously granted digital banking licenses to Sea, a technology firm as well as ride-hailing company Grab, both of whom are expected to float their own banking services in the near term. ANEXT customers will be able to open a consumer account and this access will be enabled in the third quarter of the year.
Ant Group also has a license to serve the corporate and institutional investor group in Singapore as far back as 2020, and the emergence of ANEXT will notably complement its effortacross the board.
Digital banks are growing and while they are proliferating across continents, a number of old players like Nubank are beginning to warm up to cryptocurrencies, a move ANEXT may consider in the next few years.
Chinese entertainment conglomerate Tencent has been approved by the United Nations to lead a project exploring the creation of a standard technical and security framework for non-fungible tokens (NFTs) .
The project, dubbed a “technical framework for DLT-based digital collection services” will be the world’s first U.N.-approved standards initiative for NFTs, according to state-owned local media.
The U.N. agency for information and communication technologies, The International Telecommunication Union (ITU) approved the project, which is expected to complete an initial draft by the end of 2022, according to a report from the South China Morning Post.
Currently, any recommendations advised by the ITU only become mandatory and enforceable when nations adopt them as law.
“The international standard aims to specify the technical architecture, technical flows, functional requirements, and security requirements for blockchain-based digital collectibles,” wrote Tencent in a statement released on Tuesday.
“It could help drive a consensus and common understanding around the world on the formation of a technical framework for digital collection services.”
Meanwhile, the Chinese government is in the process of developing its own state-backed Blockchain Services Network (BSN).
This will help the Chinese Government to support the deployment of NFT projects unrelated to cryptocurrency, which it banned once again in Sep 2021.
Tencent will collaborate with a number of other companies on the initiative, including Alibaba affiliate Ant Group, The Chinese Academy of Information and Communications Technology, Beijing University of Posts and Telecommunications and Zhejiang Lab.
Related:China aims to separate NFTs from crypto via new blockchain infrastructure
In China NFTs are often referred to as “digital collectibles” in order to avoid criticism from the anti-crypto media and government. For this reason, Chinese NFT-creators tend to avoid public or decentralized blockchains such as Ethereum or Solana, opting to create their collectibles on permissioned blockchains.
Despite the country’s apprehension for crypto, it’s clearly very keen on exploring potential use cases for blockchain technology.
At the end of last month, China announced the commencement of a national plan to expedite blockchain development and innovation across key areas including manufacturing, energy, government data sharing and services, law enforcement, taxation, criminal trials, inspection and cross-border finance.
What is the new “China Model”? And why would that country ban an industry that made them the ultimate leaders in the most important development in recent times? The world is still scratching its head. There has to be something else to this story. Is it only control that they want? Or does China have a secret plan nobody’s been able to figure out?
We at NewsBTC have been studying the case, looking for clues, reporting on related news. After the ban, whenBitcoin’s hash rate collapsed, we posed Bitcoin Magazine’s Lucas Nuzzi’s theory that it all had to do with the Digital Yuan, China’s CBDC. Then, we found outChinese entrepreneurs are selling small hydropower stationsand wondered if decommissioning them was part of their plan. After that, the shocking reveal that China’s dominance overBitcoin mining was already waningbefore the ban raised more questions than answers.
The fine people at Bloomberg might’ve found new clues by tackling a related but different question. In the article titled “The China Model: What the Country’s Tech Crackdown Is Really About,” they pose a theory about the reasons behind their attack on Alibaba and DiDi. Two of China’s giant unicorn tech companies, also world leaders in their respective fields. Bloomberg thinks that, after following Silicon Valley’s footsteps for years, China is trying a new model.
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Do they have a case or do China’s motives remain a mystery for us westerners? Keep reading to find out.
What Does The New China Model Consists Of?
The article starts by summarizing what happened when Uber-clone DiDi and “Alibaba’s fintech offshoot, Ant Group Co.” tried to do public in the United States. The Chinese government started actions against both companies. Alibaba’s Jack Ma disappeared from the public eye as a result.
“Just because you are a highly successful tech company does not mean you are above the CCP,” says Michael Witt, a senior affiliate professor of strategy and international business at Insead in Singapore. “Ant Group and Jack Ma found that out for themselves last year, and it is surprising DiDi did not get the message.”
What does this “China Model” have to do with Bitcoin mining? Well, the Chinese government seems to be cracking down on everything huge and technological that isn’t aligned with their interests. And we in the industry know how much Bitcoin those immense mines were producing.
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“China is actually taking the lead in setting some boundaries around the power of Big Tech,” says Thomas Tsao, co-founder ofGobi Partners, a venture capital firm based in Shanghai. “People are missing the bigger picture. They’re trying a new model.”
Is Size the Problem For The Chinese Government?
As we learned whenwe analyzed the “The Death Of China’s Bitcoin Mining Industry” article, China only banned industrial Bitcoin mining. Individuals can still mine.
“Despite the government’s hardline approach, Ye is determined to carry on: “This industry is extremely volatile. High emotions and stress are involved, but that’s also its appeal. Companies are banned from mining Bitcoin, but individuals aren’t,” Ye said, adding that he plans to turn around his operation by purchasing old equipment and downsizing.”
The Chinese government was only worried about industrial-sized private mining operations. The question is why. What are they planning?
The Chinese government seems to be playing a similar game when it comes to Big Tech.
Andy Tian, who led Google China’s mobile strategy in the 2000s and is now CEO at Beijing social media startup Asian Innovations Group, says it will be “positive for innovation” and “competition in China will be fiercer than in the U.S.,” because smaller companies will benefit from policies that rein in the largest competitors.
And they’re using the country’s unique characteristics to do this fast and mercilessly.
Angela Zhang, director of Hong Kong University’s Centre for Chinese Law and the author of Chinese Antitrust Exceptionalism, says the intervention will reshape the tech industry in China faster than it could happen elsewhere. “The case against Alibaba took the Chinese antitrust authority only four months to complete, whereas it will take years for U.S. and EU regulators to go after tech firms such as Facebook, Google, and Amazon, who are ready to fight tooth and nail,” she says.
BTC price chart for 08/10/2021 on Coinbase | Source: BTC/USD on TradingView.com
What Does The New China Model Want To Achieve?
This is where Bloomberg’s case falls flat. They have no idea what the Chinese are thinking.
If China is abandoning the Silicon Valley model, what will it replace it with? Insiders suggest it will be less founder-driven and more China-centric.
Why is China dwarfing its biggest industries and players? Is the “China Model” just concerned with scale? Or is control their focus? Are they cracking down on people and companies with too much power that work on a global scale? We wouldn’t know. However, this paragraph’s facts and assumptions could provide a clue.
Xi has called the data its tech industry collects “an essential and strategic resource” and has been pushing to tap into it for years. Following a 2015 mandate, cities from Guiyang to Shanghai have set up data exchanges that facilitate the transfer of anonymized information between corporations. This could lead to a nationalized data-sharing system that serves as a kind of digital public infrastructure, putting a massive trove of data into the central government’s hands.
Is it data they’re after? Does Bitcoin’s pseudo-anonymity scare them? Is their crackdown on Big Tech even related to their crackdown on Bitcoin mining? There’s only one thing we can know for sure: China’s making big coordinated moves when it comes to tech. And they seem to have a plan. A “China Model,” if you will.
Featured Image by Markus Winkler from Pixabay - Charts by TradingView
Sentiment in China has slumped as WeChat searches for Bitcoin dropped 7% this week, while searches for “bear market” spiked 102%. One trend that remained strong was NFT-related, with NFTs receiving an 86% increase in WeChat searches over the seven-day period. Token sales were another hot item with interest in Casper Labs surging after signups on CoinList breached 100,000 on global platforms.
One high-profile token sale to emerge from China was DAO-as-a-Service platform Dora Factory. The project, backed by DoraHacks, held a public token launch on March 21 with listings on OKEx, Gate and MXC. DoraHacks is well-known for hosting developer events and is one of the most active blockchain developer communities to originate from China. The team will be hosting a global hackathon series in 2021, landing in regions including Singapore, the United States, Germany and India.
Real world events back for spring season
Cointelegraph China kicked off their Hot Trends 2021 event in Chengdu on Thursday, welcoming a number of projects and industry participants to the southern city. The event’s speeches and panels are exploring the sustainability of trends such as DeFi and NFTs. Chengdu has long been an important city in the Chinese cryptocurrency mining space due to low electricity costs and developed infrastructure.
Solana and Serum hosted a DeFi Night in Shanghai on March 20 as they continued promoting their ecosystem in Asia. The event also included speakers from Aave, Chainlink, Multicoin Capital, Raydium and The Graph. The ecosystem arms race has become important as major players such as BSC, Huobi (Heco), OKEx (OKExChain), and Solana all attempt to attract their share of the large development pool in cities like Shanghai, Beijing, Shenzhen and Hangzhou. FTX founder Sam Bankman-Fried gave a keynote to the event via pre-recorded video.
Digital yuan tests
The Hong Kong Monetary Authority began working with the People’s Bank of China Digital Currency Research Institute to test the technology that enables the use of digital yuan for cross-border payments, according to Yu Wai-man. Yu is the current Chief Executive of the HKMA. It announced on March 19 that these financial services are expected to launch in the second half of this year.
Also on March 19, several state-owned companies, under the guidance of the CPC Working Committee began applying the digital yuan to be used as a method of payment in charging electric vehicles in the Xiongan new area near Beijing. Among these companies were a sub-branch of the PBoC, Bank of China, China Telecom and the China State Grid. Linking the digital yuan with clean energy initiatives is quickly becoming a priority for state-related organizations, especially with the announcement that the new five-year plan would target carbon neutrality by 2060.
On March 23, Chinese state media outlet Sina reported that the six largest major government-owned banks have begun testing wallet services for the digital yuan. The banks would be able to whitelist testers who can then download the mobile app and set up a sub-account. Phase 1 of the formal pilot should begin next month
Ant Group’s blockchain paper
Ant Group, a major financial subsidiary of Alibaba, issued a white paper on blockchain and government services on March 17. The paper outlined how government organizations can use information technology, digital identity solutions and blockchain infrastructure to deliver and manage data. Ant Group has had a difficult period after their highly-anticipated public offering was canceled amid concerns about interest rates on electronic lending.
Case studies on money laundering
Finally, on March 21, the PBoC and the Supreme People’s Procuratorate (China’s highest legal prosecuting authority) released six cases of modern money laundering methods, most of which included Bitcoin and cryptocurrency. In one of the cases, one convicted person received two years in prison and a fine for illegal fundraising via an unlicensed digital currency trading platform.
This new weekly roundup of news from Mainland China, Taiwan, and Hong Kong attempts to curate the industry’s most important news, including influential projects, changes in the regulatory landscape, and enterprise blockchain integrations.
Chinese fintech giant Ant Group was expected to go public on Nov. 5, until founder Jack Ma provoked regulators in Beijing, prompting China’s President Xi Jinping to personally pull the plug on the record-breaking $37 billion initial public offering (IPO).
After the Ant Group IPO was suspended, founder and China’s second-richest man Ma disappeared from the public view for over two months and China’s regulatory authorities also put forward five restructuring requirements for Ant Group.
The five requirements are as follows:
A return to the original intention of payment services and improve transaction transparency, and strictly prohibit unfair competition;
Operate personal credit investigation services legally and in compliance with laws and regulations, and protect personal data privacy;
Legally establish a financial holding company to strictly implement regulatory requirements to ensure sufficient capital and compliance with related transactions;
Improve corporate governance, strictly rectify financial activities such as illegal credit, insurance, and wealth management in accordance with prudential regulatory requirements; and,
Conduct securities and fund business in compliance with laws and regulations, strengthen the governance of securities institutions, and carry out asset securitization business in compliance.
However, whether Ant Group will manage to restructure itself to meet the new tightened regulatory requirements of China’s regulators still remains anyone’s guess.
How will Ant Group Restructure?
On January 15, Chen Yulu, deputy governor of China’s central bank, stated that Ant Group has established a restructuring work group under the guidance of the financial management department, and is formulating a schedule while maintaining business continuity of financial services to the public.
According to the SCMP, Ant Group is currently formulating a plan to establish a financial holding company in accordance with China’s new Financial Control Measures—officially implemented on Nov. 1. It will then fold certain businesses into the newly established financial holding company.
Ant Group had already preemptively taken steps against the financial control measures while preparing for its IPO, which were not yet in effect. The fintech giant’s prospectus—released on Aug 25, 2020—outlined that Ant Group planned to use its wholly-owned subsidiary Zhejiang Rongxin as the main body to apply for the establishment of a financial holding company and accept supervision.
There is speculation in the market that Ant Group may integrate financial-related businesses such as personal credit, fund sales, insurance, and payment into financial holding companies and accept the supervision of financial holding companies.
Currently, Ant Group already has traditional financial licenses for banking, insurance, funds, securities, as well as consumer finance, third-party payment and online small loan licenses—the most valuable financial licenses for Internet finance companies.
Ant’s subsidiary, Zhejiang Rongxin is expected to hold the equity of the relevant financial activity license subsidiary. Once included under the financial holding company, the financial business of Ant Group will be subject to strict regulatory supervision and restriction.
However, according to the types of financial institutions recognized by the central bank, it is still controversial whether or not all of the financial business of Ant Group will be included in the financial holding company.
Controversy and Controls
According to the China state regulators definitions of financial institutions, Ant Group’s most profitable quasi-financial institutions—Alipay, Huabei, and Jiebei—are out of place. And finding an appropriate definition for these businesses for them to be recognized by China’s financial management department is a major factor affecting the future of Ant Group.
Although Ant Group claims to have always been a technology company rather than a financial company, it is well known that from the perspective of revenue contribution, the micro-credit technology platform (mainly “Huabei” and “Jiebai” ) created the most important revenue, accounting for nearly 40% of the total revenue, surpassing its payment business. In addition, if online small loans (Huabei and Jiebei) and Alipay are included in the financial holding company, it will be a heavy blow to Ant’s capital adequacy ratio.
According to the “Financial Control Measures“, the establishment of a financial holding company requires that the paid-in registered capital is not less than RMB5 billion, and not less than 50% of the total registered capital of the financial institutions directly controlled.
Excluding financial services such as banks and funds, as of June 30, 2020, Ant Group has only two small loan companies in Chongqing with a total registered capital of RMB16 billion yuan.
After being included in the financial holding company, these companies may face stricter supervision. According to Article 24 of the “Financial Control Measures,” financial holding companies shall conduct comprehensive and continuous control over the corporate governance, capital and leverage ratios of the holding institutions included in the scope of consolidated management, and effectively identify, measure, monitor and control financial holdings.
But previously, the two Chongqing companies required a 2.3 times leverage ratio for small loan companies. Ant Microfinance achieved a leverage of more than 50 times through continuous issuance of ABS.
In 2018, due to compliance pressure, Ant began to issue a large number of joint loans, mainly with banks and financial institutions (funders) to jointly lend to customers.
Data shows that as of the first half of 2020, the credit balance facilitated by the micro-credit technology platform was RMB2.15 trillion yuan. This huge amount of funds did not come from Ant Group’s own funds. 98% of the funds came from financial institutions who partnered with Ant and by issuing ABS.
After the introduction of the new regulations for online microfinance, it requires microfinance companies to contribute to no less than 30% of the joint loan amount. If online microfinance is included in the financial holding company, Ant Group will face a huge gap in financing.
There is also a view that it may be difficult for the central bank to directly incorporate joint loans into the financial control regulatory framework, but it can start from the financial institution side.
First, it is requiring financial institutions to report information on cooperation with Ant including non-performing loan ratio, weighted average interest rate, balance at the end of the month, to figure out the composition of joint loans.
The second is to conduct supervision of asset management products invested or those issued by financial institutions such as banks and trusts.
As Ant Group is stepping up restructuring, there are reports that regulatory preparations have prompted technology giants such as Ant Group, Tencent Holdings and JD.com to share their consumer loan data to prevent excessive borrowing and fraud.
For Internet giants, consumer big data is an extremely important asset. Take Ant’s joint loan as an example. In cooperation with banks and other financial institutions, Ant Group has the advantage of acquiring users and risk control, and usually holds more power in cooperation.
It is reported that Ant usually charges up to 30% of technical service fees, while small banks are usually in a weak position and rely heavily on Ants’ data to approve loans and manage risks.
After the launch of Sesame Credit in 2015, Ant Group officially launched its credit investigation business. As an independent third-party credit agency, Sesame Credit integrates the behavioral data of more than 300 million real-name individuals and more than 37 million companies, and scores individual users and small companies based on their use of ant-related services.
This forms the foundation for other business such as Huabei and Jiebei, two consumer lending services. According to sources, the financial regulator plans to direct loan data from Internet giants into a unified nationwide credit agency.
In addition to the regulatory requirements, whether regulators will require Ant Group to return to its original payment business or how this process can be carried out remains a mystery.