Welcome back to BlockchainAsia. This is Coco. The video clip you see is generated with AI. Technology is amazing. I look forward to having more audio/video interviews with industry thought leaders.
In this episode, I talk about exchanges, stablecoins, and investments. Binance and CZ settled with U.S. regulators, at last. Tether is unstoppable, while USDC continues to lose ground. The Block, the crypto news and data company, is now mostly owned by Chinese investors.
Read on.
Exchanges
Binance
On Nov. 21, Binance, the largest spot crypto exchange with a 60%+ market share and its CEO CZ, pleaded guilty. The settlement of Binance and CZ with U.S. agencies is the largest in history. See DoJ’s announcement and U.S. Department of the Treasury’s announcement
“As part of the plea agreement, Binance has agreed to forfeit $2,510,650,588 and to pay a criminal fine of $1,805,475,575 for a total financial penalty of $4,316,126,163. Binance has also agreed to retain an independent compliance monitor for three years and remediate and enhance their anti-money laundering and sanctions compliance programs. Binance separately has also reached agreements with the CFTC, FinCEN, and OFAC, and the Department will credit approximately $1.8 billion toward those resolutions.”
Within a brief 6 years, CZ and Binance “made history”. The exchange started in 2017 in Shanghai, expelled by the Chinese government not long later, moved around the world since then, and became a dominant player.
One of the secret weapons of its fast growth has been its brazen circumvention of regulations. On the Internet, we can still find Binance’s notice to Chinese customers in 2017 after China banned ICOs. It notified customers that Binance was going to follow regulators’ decisions and restrict Chinese traders from using the exchange. The reality is that Mainland China’s users traded $9.4B spot and $80.68B futures in a single month (May 2023) on Binance.
Besides, compared with regulated exchanges or those in the U.S., Binance had all the freedom to list any token it deemed a fit, making its exchange much more attractive for users who searched for speculative opportunities.
Behemoth Binance, through its businesses from token listing, trading, payment, earn products to venture investment, to name some, is extensively entangled with crypto’s ecosystem. The last thing the industry needed was to experience another FTX type of blow. Thus, the settlement is a positive ending for the industry in twofold: removal of a potential destabilizer and leveling the playing field for other central exchanges, at least the U.S. ones.
I can’t wait to see how things unfold for Binance. One of the questions I have is, if Binance evolves into a compliant exchange under the new leadership and competes for the first time on a relatively level playing field, will it succeed or will this settlement mark the beginning of its end?
Remember, a good number of its users are those who prefer to keep their identity private by avoiding AML/KYC, those who hunt for new tokens to speculate without worrying about regulatory challenges, and those who are unbanked in their home countries and for the first time trying to make money from a new asset class.
DefiLlama (Dec. 2 data) shows Binance processed $1.79B (7-day) and $533.6B (24-hour) outflow and has clean assets close to $60B
Other questions include: Does Binance have enough money to pay for the settlement? How and when will Binance settle the lawsuit with the SEC? Will regulators in other jurisdictions follow suit to penalize Binance? How long can Binance sustain a net outflow of assets in the coming months, or how soon can it regain customers’ confidence?
Hong Kong’s SFC (Securities and Futures Commission) makes public on its website the list of formally licensed exchanges, those under review, those rejected or withdrawn, and suspicious exchanges.
This is part of Hong Kong’s effort to combat challenges from unregulated exchanges. Recently, two unregulated exchanges caused significant losses for retail investors.
Right now, the list shows two formally licensed exchanges, OSL and HashKey. Amber withdrew its application in September. Among those being reviewed, only OKX is a known brand.
HashKey Exchange has officially engaged the digital asset insurance platform Oneinfinity by OneDegree, a partnership between Munich Re and OneDegree Group. See press release.
“OneInfinity by OneDegree will provide insurance cover for digital assets stored in both hot wallets and cold wallets for HashKey Exchange, providing comprehensive coverage for investors.”
4th Largest Thai Bank Acquired a Crypto Exchange
KBank acquired a local crypto exchange Satang to expand its business into digital assets through a subsidiary the bank created particularly for digital asset-related operations and investment. The largest Thai crypto exchange is Bitkub, which has 90% of the market share. Bangkok Post report
Singapore’s regulator MAS issues new measures to discourage speculative crypto trading that will come into effect mid-2024.
Stablecoins
This panel discussion held in Istanbul discussed stablecoins and their adoption in Asia. The panelists are from Hong Kong and Turkey, sharing some unique perspectives.
Some quotes from the panelists:
“ Stablecoins has only 10% of crypto’s market cap at its peak, but every central bank’s speech is referencing stablecoins. Japan and Singapore rolled out the regulatory framework. Hong Kong is going to issue a stablecoin framework imminently. Stablecoins are still tiny, what makes central banks so nervous? “
“Most of the Global Financial system revolves around the global reserve currency which is the US dollar and a very small percentage of the eight billion global population can access US Dollars. Today with stablecoins through the crypto gateway they can now access US Dollars without a US bank account… ”
“Stablecoins need to co-exist with CBDCs to integrate with (traditional) financial infrastructure. The use case right now is more for trading, more to see in payment, payroll, foreign exchange, helping unbanked bankable…”
“Turkey‘s regulators are warm to crypto, seeing it as a way to attract capital to the country; the central bank wants to integrate it with international remittance and payment in the future. The central bank plans to roll out a pilot CBDC in 2 years. Binance Turkey’s trading volume is large compared with other markets.”
USDC continues to lose ground while Tether is taking over more market share.
Paxos received two in-principle approvals from Abu Dhabi’s regulator to issue USD and other currencies-backed stablecoins and offer brokerage and custody services. Meanwhile, Paxos also received in-principle approval from Singapore’s regulator to issue USD-backed stablecoins. See the Block
Circle and SBI signed a MoU to circulate USDC stablecoins, establish a banking relationship, and promote the use of Circle’s Web3 Services in Japan. Japan’s regulator revised the Payment Services Act in June 2023 as the framework for stablecoins.
Hong Kong Telecom (HKT), a publicly listed company signed an MoU with Hex Trust, a digital asset custodian, to issue Hong Kong Dollar-denominated stablecoins on a permissionless blockchain. See Hex Trust’s announcement
Investments
Singapore-based Foresight Ventures acquired an 80% stake in the Block at a $70M valuation. Foresight Ventures will help the Block expand to Asia and the Middle East. See CoinDesk
One of the two regulated crypto exchanges in Hong Kong OSL’s parent company BC Technology Group received an investment of $90M from BitgetX, the Hong Kong subsidiary of the exchange Bitget. BitgetX has announced to exit Hong Kong around mid-December. BitgetX’s majority shareholder is Foresight Ventures.
Tether to invest $500M in building its own mining facilities and in other miners. See Unchained
Standard Charter’s venture arm and SBI Holdings set up a digital asset joint venture investment company in the United Arab Emirates (UAE) to invest in companies in market infrastructure, risk and compliance, DeFi and tokenization. See CoinDesk
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Coco
I am Coco Kee, Co-founder of Kee Global Advisors and author of BlockchainAsia. More than 3 years ago, I started following innovations and developments in Asia’s blockchain, digital & crypto assets with the belief that this industry is inherently global and Asia is the other side of the coin. BlockchainAsia keeps readers informed of the latest developments and opportunities in Asia, a unique platform to showcase emerging Asian startups and VC funds.
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The curated content is selective and serves as information and contains personal views only, not investment advice.