Will Singapore, Hong Kong step up crypto scrutiny as US cracks down on Binance, Coinbase?

Will Singapore, Hong Kong step up crypto scrutiny as US cracks down on Binance, Coinbase?
  • The moves by the US SEC against Binance, Coinbase spooked investment sentiment just as Hong Kong seeks to establish itself as a trading hub along with Singapore
  • Unlike Singapore and Hong Kong, the US does not have comprehensive regulations for crypto and blockchain firms to operate without fear of regulatory action

US regulatory action against two major cryptocurrency exchanges, Coinbase and Binance, is likely to serve as a reference point for Hong Kong and Singapore as they seek to balance growth with investors’ safety, analysts have said.

The crackdown is the latest in a series of measures by the US Securities and Exchange Commission (SEC), which has levied fines and other penalties against crypto-lending firms, following the collapse of one of the most-reliable crypto exchanges FTX last November that sparked public outrage.

The SEC said Coinbase had acted as a broker, exchange and clearing agency for investments without proper registration. The complaint came a day after the regulator sued Binance, alleging it had tried to evade US regulation.

Binance said the enforcement action was unwarranted and alleged it was a regulatory “overreach” that damages the United States’ status as a global financial hub. Paul Grewal, Coinbase’s general counsel, said in a statement that the company would continue operating as usual and had “demonstrated commitment to compliance”, according to Reuters.

The development spooked investment sentiment just as Hong Kong is seeking to frame regulations to establish itself as a trading hub along with Singapore, which already has such a framework.

The two cities may look at the US action as a reference point, which could mean tighter scrutiny even in the Asian hubs, analysts say.

“There will be a fallout for sure. Hong Kong and Singapore are taking measures to regulate the cryptocurrency industry by proposing new licensing regimes for virtual asset trading platforms,” said Anndy Lian, Singapore-based author of the book “NFT: From Zero to Hero”.

Unlike Singapore and Hong Kong, the US has yet to come up with a comprehensive set of regulations that allows cryptocurrency and blockchain firms to operate transparently without fear of regulatory action.

“The war that the US is waging on cryptocurrencies shows no signs of abating, and it will only intensify as time wears on,” said Julian Hosp, the CEO and co-founder of Cake Group, a fast-growing Southeast Asia’s digital assets innovator.

The regulator’s action is part of a larger trend which is likely to continue into the 2024 presidential election, Hosp said.

Industry cautions on overkill

The Securities and Futures Commission (SFC) in Hong Kong has requested feedback on a proposal that would require virtual asset trading platform operators to obtain the same type of licences as securities traders, Lian said, adding that it had asked other firms who were not applying to prepare for an orderly closure.

Securities, as opposed to other financial assets, are strictly regulated and require detailed disclosures to inform investors of potential risks.

“These developments indicate that cryptocurrency exchanges seeking approval in Hong Kong and Singapore will have to adhere to new regulatory requirements and may be subject to increased scrutiny from regulators,” Lian said.

But new regulations could help establish the legitimacy of the cryptocurrency industry and potentially attract more investors and businesses at a time people are increasingly wary of the US market, analysts said.

“The SEC’s lawsuit primarily focuses on actions that have taken place in the United States and their impact on American citizens,” said Rajagopal Menon, vice-president of WazirX, India’s leading cryptocurrency exchange.

“As for regulators in Hong Kong, such as the Securities and Futures Commission, and Dubai’s Virtual Asset Regulatory Authority, the SEC’s lawsuit can serve as a point of reference or information. However, it does not automatically alter their regulatory stance or trigger immediate action,” he added.

At the two-day Crypto Expo Asia in Singapore, attendees were unbothered by news about Binance and Coinbase, with little to no mention about the developments.

Though the US action may not have a direct impact on other regions, Menon conceded that it could potentially have some indirect influence on their decision-making processes.

Nizam Ismail, founder of Singapore-based compliance consultancy Ethikom Consultancy, said crypto investors too were likely to be more cautious about risks and the need for due diligence on intermediaries.

“These products will be subject to prudential and consumer protection requirements. In the longer term, regulatory gaps will be addressed and consumer protection measures are likely to be introduced,” he added.

The development also exposed extreme price fluctuations in the digital assets which have made many traditional investors in assets like stocks and bonds cautious about investing in the digital asset.

After initially falling to a three-month low of US$25,750 following the Binance lawsuit, bitcoin has rebounded to around US$27,000 in afternoon trade in Asian hours.

Some investors – typically traditional investors, family offices and high net worth individuals – may have been deterred by the US regulator’s lawsuits, while “die-hards” long time investors “would not care”, said Hayden Hughes, the chief executive office and co-founder of Alpha Impact, a social trading platform.

A key takeaway from the incident for Asian hubs like Hong Kong is to have “regulatory clarity”, he said, adding that Hong Kong’s decision to open up to crypto and implement regulations had been a step in the right direction.

But it is unlikely that the event would deter crypto exchanges from seeking approval from Hong Kong and Singapore authorities, he said, highlighting that the two cities would gain from establishing clear rules and a licensing framework.

“Asian hubs can focus on their core mission of protecting the retail investors. There is absolutely no incentive for regulators to move fast and break things,” Hughes said.

Industry executives urged regulators to strike a balance with the fledgling industry.

Hong Kong and Singapore were unlikely to be impacted by the developments “if there is a will on both sides” and regulators are cautious “to not overkill the opportunity”, said Thomas Tallis, CEO of TVVIN, a firm that takes real-world assets and issues them on the blockchain.

Source: https://www.scmp.com/week-asia/economics/article/3223305/will-singapore-hong-kong-step-crypto-scrutiny-us-cracks-down-binance-coinbase

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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NCET cracks down on illicit activities in cryptocurrency market

NCET cracks down on illicit activities in cryptocurrency market

Multiple news outlets have reported that the US Department of Justice (DOJ) is increasing its efforts to combat illicit activities and criminal behaviour, such as money laundering, within cryptocurrency exchanges and platforms. To this end, the DOJ’s national cryptocurrency enforcement team (NCET) is focusing its attention not only on exchanges but also on crypto mixers and decentralised finance (DeFi) platforms that engage in unlawful acts.

NCET’s focus

The NCET’s focus on cryptocurrency-related crimes highlights the United States government’s efforts to regulate the cryptocurrency market. The NCET aims to prevent criminals from using digital assets to carry out illegal activities and to ensure the safety and fairness of the cryptocurrency market for investors. The increased efforts of the NCET and other regulatory bodies to combat cryptocurrency fraud and criminal activity indicate the growing importance of regulation in the cryptocurrency market.

They have a broad mandate, blurring lines between traditional white-collar and other federal crime and the emerging technologies associated with cryptocurrency and cyber-instrumentalities, neither of which are governed by clear, subject matter-specific statutes. The team aims to assist in tracing and recovering assets lost to fraud and other illegal activities.

Eun Young Choi, the newly appointed director of the cryptocurrency enforcement team, has vowed to crack down on illicit behaviour and to hold companies accountable for allowing or facilitating criminal activity on their platforms. In recent months, the US government has shut down nine exchanges suspected of money laundering.

For example, in May 2023, the US government, in collaboration with Ukrainian authorities, shut down nine cryptocurrency exchanges suspected of money laundering activities in recent months. The authorities shut down all servers of crypto exchanges 24xbtc.com and 100btc.pro, pridechange.com, 101crypta.com, uxbtc.com, trust-exchange.org, bitcoin24.exchange, paybtc.pro, and owl.gold.

Each platform offered users anonymous crypto transactions through voluntary registration programs violating several US laws. The exchanges were considered important hubs in the cybercrime ecosystem and were accused of violating US laws and having lax know-your-customer (KYC) controls.

It was also mentioned that the NCET Team wants to crack down on illicit investment scams such as the “pig butchering” scheme on crypto exchanges. This scam involves scammers playing the long game, “fattening up” potential victims to extract as much money as possible before the “slaughter”. The goal is not to extract money quickly, unlike other common scams. The term originated from a Chinese phrase with the same meaning.

They have also emphasized its partnerships with other federal agencies, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), in monitoring the cryptocurrency industry.

The government’s goal is to coordinate efforts and respect primacy among subject matter experts while unleashing US regulators to dig deeper into emerging markets and the technologies that support them. With the creation of the NCET, a rise in enforcement actions, and the end of the cryptocurrency “grace period,” stakeholders active in the cryptocurrency markets need to ensure their regulatory compliance.

A two-phase strategy for cryptocurrency regulation

Some experts believe that the US government’s actions signal a coordinated regulatory campaign to stymie the growth of the cryptocurrency industry. Personally, I do not think so. The regulation of cryptocurrencies requires a meticulously planned strategy that adapts to the ever-changing landscape of this digital realm.

To ensure its effectiveness, a two-phase approach should be followed. In the initial phase, the primary objective is to disrupt the flow of cryptocurrencies to illicit actors. This can be achieved by maintaining updated lists of sanctioned intermediaries and providing clear guidelines to individuals and businesses in the United States, helping them identify and avoid engaging with foreign companies under sanctions.

Furthermore, a comprehensive analysis should be conducted concurrently to evaluate the efficacy of these measures in combatting illicit financial activities associated with cryptocurrencies. This in-depth assessment would give regulators a deeper understanding of the outcomes of their actions.

By closely monitoring cryptocurrency intermediaries and rigorously evaluating the results, regulators can gather invaluable insights into the potential of cryptocurrencies as a legitimate instrument for promoting financial inclusion.

The findings and evaluations obtained in the initial phase will form the basis for the subsequent stage. If the analysis demonstrates a significant reduction in illegal cryptocurrency transactions due to effective law enforcement, it would create strong momentum for the government to proceed with the implementation of a Central Bank Digital Currency (CBDC).

This would indicate that the risks tied to illicit cryptocurrency activities can be adequately managed. However, if the measurements from the first phase reveal limited progress in addressing the criminal use of virtual currencies, it would underscore the government’s need to enhance enforcement mechanisms before considering the introduction of a CBDC.

It becomes crucial to prioritise efforts to target foreign exchanges and influential intermediaries through stringent sanctions, effectively combating theft, fraud, and extortion. Prudence dictates that new currencies should not be introduced hastily, and a comprehensive understanding of cryptocurrency dynamics must be achieved before any further steps are taken.

I think a well-executed phased approach to cryptocurrency regulation, supported by vigilant monitoring, thorough evaluation, and targeted enforcement measures, promises to provide valuable insights into the viability of cryptocurrencies for legitimate financial activities.

By diligently assessing the impact of regulatory efforts, policymakers can make informed decisions regarding the potential implementation of a CBDC, thereby ensuring effective control over illicit activities within the cryptocurrency ecosystem. Continual adaptation and improvement in response to the evolving challenges of this digital landscape are essential for fostering a safe and inclusive environment for cryptocurrency transactions.

 

Source: https://e27.co/ncet-cracks-down-on-illicit-activities-in-cryptocurrency-market-20230522/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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