Sandbank, a leading crypto lending and investment platform, has announced its temporary suspension of new deposits and investment features in response to the challenges and uncertainties prevailing in the crypto market. The platform aims to ensure a secure environment for users to engage in their investment activities.
In recent times, numerous crypto companies have encountered serious challenges due to tightening regulations and inherent flaws in their business models. Just a few days ago, Delio and Haru Invest, two Korea-related crypto lender platforms, halted their withdrawal services. It is worth noting that Delio is a regulated entity holding both Korea’s Virtual Asset Service Provider (VASP) and the USA’s Money Services Business (MSB) licenses.
Despite the tumultuous climate, Sandbank claims to reassure its users by affirming the uninterrupted availability of its withdrawal and asset management functions. The platform remains committed to supporting its users in maintaining a healthy and prosperous crypto investment journey. Sandbank pledges to uphold the highest standards of service and will continue to assist customers throughout their investment endeavors.
Hong Kong-based digital assets company Hash Blockchain Limited (HBL), a member of the HashKey Group, announced to secure regulatory approval from the Securities and Futures Commission of Hong Kong (SEC) to operate a virtual asset trading platform.
HashKey said the company now has received a Type 1 (dealing in securities) and a Type 7 (providing automated trading services) license, allowing them to provide automated trading services for cryptocurrencies such as Bitcoin and Ether, and stablecoins, security tokens, according to the statement.
Michel Lee, Executive President of HashKey Group, said he is delighted to receive the licenses, given the backdrop of this positive announcement.
“This enables us to provide regulated and compliant virtual asset trading services as we continue to help build the financial, technological and service infrastructure to facilitate and contribute to the rapid growth and the long-term development of the ecosystem.”
“Our objective is to build a platform that is best in class in terms of technology, security and trading experience for our clients,” Colin Zhong, CEO of HBL, also welcomed the latest regulatory approval from the authority, adding that “One of the focuses of HashKey’s virtual asset exchange will be on the tokenisation of non-traditional assets, leveraging the robust ecosystem HashKey has developed over the years.
The latest approval enables Hashkey group to get the green light not just to operate in Hong Kong but also from Japan and Singapore conditionally, which comes after another Hong Kong-based virtual assets platform OSL Exchange licensed virtual asset trading platforms in the city.
Recently, the HKSAR government published a policy statement supporting the city to develop virtual assets under a supervised regime, including the issuance of tokenised green bonds and the preparation of developing the digital Hong Kong Dollar. The administration’s move is considered to catch up with regional competitors like Singapore.
Chief Executive of HKSAR John Lee delivered his first policy address Wednesday, indicating that the administration has proposed a bill to establish a statutory licensing regime for virtual asset service providers.
In his first policy address to the Legislative Council, the leader of Hong Kong expressed his stance towards virtual assets regulation and the outlook as well as the development in terms of digital Hong Kong dollars, according to the latest published policy address.
Speaking of virtual assets among various issues, Lee, the successor of Carrie Lam, who took over the authority in July, said:
“On virtual assets, the Government has introduced a bill to propose establishing a statutory licensing regime for virtual asset service providers. The Hong Kong Monetary Authority (HKMA) is examining market feedback on the regulation of stablecoins and will ensure that the regulatory regime is in line with both the international regulatory recommendations and the local context.”
Currently, only one licensed virtual asset trading platform, OSL, is listed on the Securities and Futures Commission (SFC) as of August 2022; while another private company, Hashkey Group, secured Approval-in-Principle to operate a licensed virtual asset trading platform from the SFC in Hong Kong since 2020.
Previously, Lee’s deputy, Financial Secretary Paul Chan, disclosed to address the policy statement related to digital assets during the upcoming Fintech Week by the end of October.
Hong Kong remains struggling for the recovery and revival of the economy amid the pandemic of COVID-19, facing strong competitors regionally and globally as well. The city has joined other global countries to study the adoption of digital currency to boost the economy and its currency in the long term.
The policy address reads that the HKMA has also begun the preparatory work for issuing “e-HKD” and is collaborating with the Mainland institutions to expand the testing of “e-CNY” as a cross-boundary payment facility in Hong Kong.
Lee’s policy implementation comes after his speech in July, pledging to explore central bank digital currency in terms of retail level (rCBDC), and escalating the scenario for the application of mBridge initiative, a collaborative CBDC project between HKMA and the central banks of Thailand, China, the United Arab Emirates and the BIS to enhance multi-currency cross-border payments.
According to statistics from the government, there are over 600 Fintech companies in the city. Lee said the administration “is vigorously promoting Fintech by encouraging more Fintech services and products to undergo proof-of-concept trials, taking forward cross-boundary Fintech projects and nurturing Fintech talents.”
In addition, “the Commercial Data Interchange will be launched within this year to provide a one-stop platform for enterprises to share operational data, enabling banks to make accurate assessments on the operating condition of enterprises and providing SMEs with a better chance of securing loans,” according to the policy address.
The Hong Kong Special Administrative Region’s government will release the plans for the development of virtual assets in the city during the upcoming FinTech Week by the end of the month.
In a blog post published by Financial Secretary Paul Chan Mo-po on Sunday, the policy statement will consist of the government’s “vision and strategy, regulatory regime, attitude towards opening up investors’ access to virtual assets, and the technological advantages brought by virtual assets launch pilot projects.”
The annual Hong Kong FinTech Week will be held from October 31st to November 4th, with the theme of “Breaking the Boundaries and Creating Extraordinary”. “The policy statement will clearly express the government’s position, demonstrate to the global industry our vision to develop Hong Kong into an international virtual asset centre, and our commitment and determination to explore financial innovation with the global asset industry,” the blog post stated.
Alongside the traditional fintech events, similar to last year, Hong Kong FinTech Week will also host the third-generation Internet (Web3), the Metaverse and other concepts to add new elements.
“A first-come, first-served basis, in the form of non-fungible tokens (NFT) to distribute limited quantities to participants version of the Proof of Attendance Protocol (POAP) token,” will be part of the blockchain attraction for the annual fintech event.
Owners of these NFT tokens will gain access to creating their personal avatars through 3D scanning, according to the blog post. It further added that token owners “will be able to use the tokens to participate in other industry events preferentially in the future.”
Development of virtual assets in Hong Kong
In terms of recent developments in the virtual assets sector in Hong Kong, Hashkeys Group and OSL Digital Securities Limited (OSL) have secured Type 1 SFC-licensed to deal with security. Type 1 license also empowers OSL to serve investors in Hong Kong through private security token offerings (STOs).
Previously, Blockchain.News reported that the China-based cryptocurrency exchange is the first regulated digital assets brokerage firm in Hong Kong to facilitate sales of new asset-backed digital tokens classed as securities to global institutions.
OSL has been doing that for a while. So far, its institutional clients include the likes of Animoca Brands, Head & Shoulders Financial Group, China Fortune Financial Group Limited, Volmart, and Monmonkey Group Asset Management Limited.
OSL first received approval in principle from Hong Kong’s Securities and Futures Commission (SFC) in August 2020, to license the cryptocurrency firm.
Meanwhile, the government has also actively begun introducing security measures against illegal acts conducted through virtual assets and blockchain technology.
The government has announced the framework of a new regulatory regime for virtual assets and associated products and services. The new framework for virtual asset service providers (VASPs) has been designed primarily to combat money laundering and terrorist financing risks. It is scheduled to take effect on 1 January 2023.
The key highlight of the new security measure is that the VASP regulatory regime consists of new licensing and regulatory requirements for VASPs’ operations.
According to the Financial Services and the Treasury Bureau, the licensing requirements of the new VASP regime are highly specialised and technical.
In response to the announcement of the framework of a new regulatory regime, Mayer Brown – a Chicago-based global white-shoe law firm – said, “Hong Kong’s new VASP regime is a recent addition to this space and it will be interesting to see the extent to which, if at all, the new regime impacts the growth of the VA industry in Hong Kong.”
The Bangko Sentral ng Pilipinas, the Central bank of the Philippines, announced on Thursday that it would close the regular application window for new virtual asset services providers (VASP) licenses for a period of three years beginning September 1.
VASPs are firms that offer certain services associated with virtual assets or cryptocurrencies such as Bitcoin.
The Philippine Central Bank said it reached the move because it wants “to strike a balance between promoting innovation in the financial sector and ensuring that associated risks remain within manageable levels.”
The regulator stated it would conduct a reassessment based on market developments. In other words, the strategic change would enable the watchdog to monitor the performance of current market players and the risks they pose to the financial industry. The agency further said the move would allow it to assess the impacts of existing digital asset providers concerning the country’s financial inclusion and digital payments transformation objectives.
The Bangko Sentral said that central bank-supervised institutions that intend to expand offerings to virtual-asset services like custody may still apply for a license.
The regulator stated that all applications that have completed stage 2 of the bank’s licensing process by August 31 August would be processed and assessed as normal.
The agency noted that applications with incomplete requirements would be returned and considered closed.
The central bank will no longer accept new applications starting September 1.
Virtual Assets on The Rise
At the end of June, the Philippine Central Bank approved 16 new virtual asset services providers to operate in the local markets.
In December last year, the regulator reminded the public to transact only with central bank-registered Virtual Asset Service Providers (VASPs) as transactions involving digital assets continued to rise rapidly.
The agency advised the public to be vigilant in their dealings involving VAs, which are not considered legal tender and not insured by the Philippine Deposit Insurance Corporation.
The regulator further mentioned that registered VASPs are mandated to comply with regulations that promote operational soundness and provision of quality services and ensure appropriate consumer protection.
As of June 2021, virtual currency transactions in the Philippines reached 19.88 million, an increase of 362% from the 4.31 million recorded in the previous year. Such transactions translated to P105.93 billion in value, an increase of 71% from P62.12 billion over the same period.
Virtual Assets Service Providers (VASPs) that originate from Singapore but offer their business offerings or products abroad are now required to secure licensing from the relevant authorities, a shift in position that may soon become law as the country’s Parliament has passed the Financial Services and Markets Bill on Tuesday.
As reported by Bloomberg, the new bill is deemed essential in curtailing all avenues by which crypto-hinged trading platforms will be a conduit for Anti-Money Laundering (AML) offences.
“Virtual asset service providers created in Singapore that provide services only elsewhere are unregulated for anti-money laundering and countering the financing of terrorism (AML/CFT), which creates reputational risks for the Republic,” said Monetary Authority of Singapore (MAS) board member Alvin Tan.
Singapore’s approach to supporting the growing digital currency ecosystem is multi-faceted. While the country’s regulators believe in the revolutionary potentials of these nascent asset classes and the technologies powering them, a great deal of caution is being exercised as it does the hard work of cautiously picking the companies it grants its licenses.
While some financial institutions like the Amber Group and DBS bank have enjoyed an excellent regulatory regime to operate in Singapore, mainstream players like Binance have had to pull out of the race for a license to operate in the country with the almost unending waiting process. In the MAS’s defence, the average investor who engages with the crypto space must be protected, hence the essence of the due diligence it takes in issuing licenses to apply to crypto platforms.
The recently passed bill also seeks to curb the incident of hacks and data breaches on protocols linked to Singaporean regulators. Per the new provision, a maximum fine of S$1 million ($737,050) can now be imposed on financial institutions, presumably, crypto-based firms, if they experience cyberattacks or their services are disrupted.
The European Union is looking to launch a new agency designated with cracking down on money laundering at the regional level, with increased reporting requirements around crypto transactions listed among its principal objectives.
A July 8 report from Reuters citing leaked EU documents asserts the European Commission is proposing forming a new Anti-Money Laundering Authority (AMLA) that would act as the “centerpiece” of an oversight system also including national regulators.
The report also states that European lawmakers are drafting new requirements for virtual asset service providers (VASPs) mandating stringent data collection standards surrounding parties making cryptocurrency transfers. Data collected would also be made accessible to European regulators.
The report notes that crypto asset transfers are not currently under the scope of EU regulations surrounding financial services, stating:
“The lack of such rules leaves holders of crypto-assets exposed to money laundering and financing of terrorism risks, as flows of illicit money can be done through transfers of crypto-assets.”
The EU has come under pressure to strengthen its anti-money laundering guidelines after several member states launched investigations into Denmark’s largest bank, Danske Bank, over 200 billion euro worth of suspicious transactions that flowed through its small Estonian branch between 2007 and 2015.
In the absence of a supranational regulatory institution tasked with policing money laundering, the EU has historically had to rely on national authorities to enforce its policies.
“Money laundering, terrorist financing, and organized crime remain significant problems which should be addressed at Union level,” the documents stated.
“By directly supervising and taking decisions towards some of the riskiest cross-border financial sector obliged entities, the Authority will contribute directly to preventing incidents of money laundering/terrorist financing in the Union.”
SEC urged to crack down too
Europe isn’t alone in moving to crack down on crypto, with U.S. Senator Elizabeth Warren urging the Securities and Exchange Commission to crack down on the “highly opaque and volatile” digital asset markets on the same day.
Related:From mining to software: China’s regulatory crackdown on crypto continues
“While demand for cryptocurrencies and the use of cryptocurrency exchanges have sky-rocketed, the lack of common-sense regulations has left ordinary investors at the mercy of manipulators and fraudsters,” Warren said, adding:
“These regulatory gaps endanger consumers and investors and undermine the safety of our financial markets. The SEC must use its full authority to address these risks, and Congress must also step up to close these regulatory gaps.”
The U.K. Financial Conduct Authority (FCA) has also sought to take action against major crypto exchange Binance in recent weeks, appearing to prompt a wave of local banks to stop processing payments to and from the platform.
