February 4th, 2024

Harvest Fund’s Spot Bitcoin ETF Application: A Game-Changer for Hong Kong’s Crypto Landscape

In a groundbreaking move that could reshape Hong Kong’s financial landscape, Harvest Fund Management has officially submitted the first-ever application for a spot Bitcoin ETF to the Hong Kong Securities and Futures Commission (SFC) on January 26. This development comes hot on the heels of the recent approval of similar ETFs by the US Securities and Exchange Commission (SEC) and marks a pivotal moment for the city’s growing interest in cryptocurrencies.

The SFC has expressed a keen interest in expediting the approval process for Hong Kong’s inaugural spot Bitcoin ETF. Plans are underway to list it on the Hong Kong Stock Exchange shortly after the Chinese New Year in February. This rapid development could set the stage for multiple institutions to enter the market, aligning with the US model where ETF sizes grew rapidly under the influence of key financial players.

While Harvest Fund is the first to apply, several existing crypto companies that launched futures-based ETFs in Hong Kong are expected to follow suit. Samsung Asset Management, known for launching the Samsung Bitcoin Futures ETF in 2023, has expressed openness to exploring a spot ETF. Other financial firms such as Venture Smart Financial Holdings have shown interest in applying for a spot crypto ETF too.

Moreover, Harvest Fund’s ETF might distinguish itself from its US counterparts. There are indications that it could allow not only traditional fiat currency subscriptions but also direct Bitcoin subscriptions. This novel approach could provide investors in the region with a distinctive and flexible investment option.

Implications for Hong Kong’s Financial Landscape

The recent developments in Hong Kong are not surprising given the city’s crypto-ready stance. Hong Kong has been a frontrunner in embracing digital assets, evidenced by its eight-month-old rulebook about digital assets, aimed at protecting investors while encouraging innovation. This forward-thinking approach has positioned Hong Kong as an attractive destination for crypto-related ventures.

The introduction of a spot Bitcoin ETF is bound to have a profound impact on Hong Kong’s financial sector, providing investors with an accessible and regulated gateway to the world of cryptocurrencies. It aligns with the city’s goal to establish itself as a digital-asset hub, fostering innovation while ensuring investor protection.

Growing Acceptance of Crypto in Hong Kong

The submission by Harvest Fund signals a remarkable shift in the perception and acceptance of cryptocurrencies within mainstream financial markets. However, this acceptance is not limited to ETFs. The Hong Kong Monetary Authority (HKMA) has been in discussions with companies like Harvest Global Investments, RD Technologies, and Venture Smart Financial Holdings regarding stablecoin trials within regulatory sandboxes. These developments underline Hong Kong’s commitment to fostering innovation and facilitating the integration of digital assets into its financial ecosystem.

Impact on Investment Opportunities

The potential approval of Harvest Fund’s ETF could open the floodgates for a diverse range of investors, especially those who are traditionally cautious due to the perceived complexity and risks associated with the crypto market. The potential approval aligns with a global trend where institutional investors are increasingly exploring cryptocurrency as an alternative investment, particularly in the wake of traditional market challenges.

Anndy Lian, an intergovernmental blockchain advisor, emphasizes the global context, pointing out that the Chinese stock market had a lackluster performance in 2023. The increasing interest in crypto alternatives is viewed as a positive development for the crypto industry. Harvest Fund, ranking as China’s sixth-largest public fund manager, filing for a Bitcoin ETF could pave the way for more Chinese capital to flow into the crypto market.

Global Impacts

Global Crypto Adoption

The developments of the crypto landscape in Hong Kong are likely to influence other nations in the integration of crypto into traditional financial systems. The approval of a spot Bitcoin ETF in Hong Kong could encourage regulatory bodies in other countries to review their own stance about cryptocurrencies and provide a clearer regulatory framework for digital assets. Hong Kong’s regulatory approach to the spot Bitcoin ETF approval may serve as a blueprint for other regions. Regulators in various jurisdictions are likely to closely observe how Hong Kong balances investor protection with fostering innovation. The approval could set a standard for regulatory frameworks, providing clarity and encouraging other countries to follow suit.

Global Investor Confidence

Furthermore, the potential approval of a spot Bitcoin ETF in Hong Kong is poised to attract investors, especially institutional ones, on a global scale. Hong Kong’s embrace of a spot Bitcoin ETF could instill a sense of confidence in investors worldwide. The move signifies a departure from the skepticism that has surrounded cryptocurrencies in some traditional financial circles. As confidence grows, more investors, both retail and institutional, may be inclined to allocate a portion of their portfolios to digital assets. That’s why investors, both in Asia and beyond, are closely monitoring Hong Kong’s stance on cryptocurrency investment.

Increased Market Capitalization of Cryptocurrencies

It’s also worth mentioning that the approval of a spot Bitcoin ETF in Hong Kong could contribute significantly to the overall market capitalization of cryptocurrencies. As institutional investors gain easier access to Bitcoin through ETFs, a surge in demand is likely, driving up the price of the digital asset. This increased valuation directly contributes to the broader market capitalization of cryptocurrencies.

Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.

Source: https://www.bitget.com/en-GB/academy/harvest-fund-filed-the-first-spot-btc-etf-in-hong-kong

Anndy Lian

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”.

www.anndy.com

j j j

November 14th, 2023

India Legal Landscape Unchanged: Supreme Court Rejects Crypto Regulation Petition

The Supreme Court of India’s recent decision to dismiss a petition seeking the establishment of a regulatory framework for cryptocurrency trading has sparked significant discussion in the financial and legal communities. The petition, filed by a former director of a motion picture company who is currently in custody for alleged crypto fraud, was rejected on the grounds that it was a legislative matter beyond the court’s jurisdiction. This decision highlights the judiciary’s recognition of its limits in creating laws, especially in complex and emerging areas like cryptocurrency. In this article, I will analyze the implications of this decision and the challenges and opportunities for crypto regulation in India.

The petitioner, Manu Prashant Wig, was accused by the Economic Offence Wing (EOW) of the Delhi Police in 2020 of deceiving investors with promises of high returns from crypto investments. The case against Wig gained momentum as 133 investors reported being victims of the scheme. Seeking relief, Wig filed a Public Interest Litigation (PIL) for crypto trading regulations in India, which the Supreme Court eventually rejected.

During the hearing, the Supreme Court advised Wig to seek legal remedies through appropriate channels, specifically for bail. Consequently, the court highlighted its inability to issue directives under Article 32 of the Constitution for such legislative matters. Article 32 empowers the Supreme Court to issue writs for the enforcement of fundamental rights, but it does not authorize the court to make laws or policies. The court also noted that the government was already working on a regulatory framework for cryptocurrencies, informed by recommendations from the International Monetary Fund (IMF) and the Financial Stability Board (FSB).

The Supreme Court’s decision to reject the PIL signifies a clear demarcation between judicial and legislative responsibilities. Moreover, it reflects the complexities and challenges in regulating emerging technologies like cryptocurrencies. As India moves closer to formulating a comprehensive crypto regulatory framework, this decision reinforces the need for legislative action to address the growing concerns and interests in the crypto market. The outcome of these developments is keenly awaited by investors, legal experts, and the crypto community alike, as it will shape the future of cryptocurrency trading in India.

Cryptocurrencies are digital or virtual currencies that use cryptography to secure and verify transactions and to control the creation of new units. They operate on decentralized networks that are not controlled by any central authority or intermediary. Some of the most popular cryptocurrencies include Bitcoin, Ethereum, Ripple, and Litecoin.

Cryptocurrencies offer several advantages, such as faster and cheaper cross-border payments, greater financial inclusion, enhanced privacy and security, and lower transaction costs. They also pose several risks, such as volatility, cyberattacks, fraud, money laundering, tax evasion, and regulatory uncertainty.

India has a large and growing crypto market, with an estimated 15 million crypto users and over 350 crypto startups. However, the legal status of cryptocurrencies in India has been unclear and inconsistent. In 2013, the Reserve Bank of India (RBI) issued a cautionary advisory on the potential risks of dealing with virtual currencies. In 2017, the government set up an inter-ministerial committee to study the issues related to cryptocurrencies and propose a legal framework. In 2018, the RBI banned banks and other regulated entities from providing services to crypto businesses and individuals. In 2019, the committee submitted its report and draft bill, which recommended a complete ban on private cryptocurrencies and the creation of a digital rupee by the RBI. In 2020, the Supreme Court quashed the RBI’s ban, stating that it was disproportionate and violated the constitutional right to trade. In 2021, the government introduced the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the Parliament, which seeks to prohibit all private cryptocurrencies except for certain exceptions and to provide for the establishment of a digital currency by the RBI. However, the bill has not been passed yet and its details are not publicly available.

The lack of a clear and consistent legal framework for cryptocurrencies in India has created confusion and uncertainty among the stakeholders. The crypto industry has faced several challenges, such as a lack of access to banking services, regulatory hurdles, operational difficulties, and reputational damage. Crypto users have faced several risks, such as a lack of consumer protection, legal recourse, and tax clarity. The government has faced several dilemmas, such as balancing innovation and regulation, protecting national security and public interest, and aligning with global standards and best practices.

The need for a comprehensive and coherent crypto regulatory framework in India is evident and urgent. Such a framework should aim to achieve the following objectives:

To recognize and define cryptocurrencies as a distinct asset class with appropriate legal status and classification.
To establish a competent and independent regulatory authority to oversee and regulate the crypto market and its participants, such as exchanges, wallets, custodians, brokers, and investors.
To provide clear and consistent rules and guidelines for the crypto industry and users, such as licensing, registration, reporting, disclosure, compliance, auditing, taxation, and dispute resolution.
To protect the rights and interests of the crypto users, such as privacy, security, transparency, accountability, and redressal.
To prevent and combat the misuse and abuse of cryptocurrencies for illegal and illicit activities, such as money laundering, terrorism financing, fraud, and cybercrime.
To promote and support the innovation and development of the crypto ecosystem, such as research, education, awareness, adoption, and integration.
To foster and facilitate cooperation and coordination among the relevant stakeholders, such as the government, the RBI, the regulators, the industry, the users, and the international bodies.

A comprehensive and coherent crypto regulatory framework in India would benefit all the stakeholders. It would provide legal certainty and legitimacy to the crypto industry and users, and enable them to access and leverage the opportunities and advantages of cryptocurrencies. It would also enhance the efficiency and effectiveness of the government and the regulators, and enable them to address and mitigate the risks and challenges of cryptocurrencies. It would also contribute to the growth and development of the crypto ecosystem and position India as a global leader and hub for crypto innovation and adoption.

The Supreme Court of India, led by Chief Justice Chandrachud, has shown wisdom and restraint in dismissing the petition for crypto trading regulations. The court has rightly recognized that it is not its role to make laws or policies, especially in complex and emerging areas like cryptocurrency. The court has also rightly acknowledged that the government is already working on a regulatory framework for cryptocurrencies, and has deferred to its authority and expertise. The court has thus upheld the constitutional principle of separation of powers and the rule of law.

“In my analysis of the recent Supreme Court decision, I, Anndy Lian, emphasize the crucial role this ruling plays in defining the boundaries between judicial and legislative responsibilities. The dismissal of the petition underscores the judiciary’s recognition of its limitations in shaping laws, particularly in intricate domains like cryptocurrency. As we anticipate India’s journey towards a comprehensive regulatory framework, it becomes evident that legislative action is paramount to addressing the multifaceted concerns and opportunities within the crypto market.”

The ball is now in the court of the government and the legislature. They have the responsibility and the opportunity to create a comprehensive and coherent crypto regulatory framework for India, that balances the interests and needs of all the stakeholders, and that reflects the realities and aspirations of the crypto market and community. The time is ripe and the stakes are high. The government and the legislature should act swiftly and wisely, and deliver a crypto regulatory framework that is fair, progressive, and visionary.

Source: https://in.investing.com/analysis/india-legal-landscape-unchanged-supreme-court-rejects-crypto-regulation-petition-200602707

Anndy Lian

www.anndy.com

j j j

October 30th, 2023

Navigating the UK’s Cryptocurrency Landscape

The United Kingdom’s recent proactive stance towards the cryptoasset sector is indicative of its commitment to provide clarity, assurance, and protection for both consumers and businesses. With these new regulations slated for implementation earlier this month, the purview spans a vast spectrum of crypto activities, right from trading, and lending, to custody and promotion. However, they also inadvertently weave in a layer of complexity, especially for foreign entities and those yet to be registered, who are vying for a foothold in the UK market.

Central to this regulatory framework is the Payment Services Act (PSA) of 2019, which lays the groundwork for payment service providers, and by extension, entities involved in the realm of cryptoassets. The PSA defines cryptoassets as digital representations of value or rights, which are secured cryptographically and can be transferred and used for investment purposes. It’s pertinent to note that these definitions exclude cryptoassets that squarely fit within the classifications of electronic money or controlled investments already in existence. A further demarcation within the PSA categorizes services as digital payment token (DPT) services and e-money token (EMT) services. The former encompasses platforms, brokers, and those involved in custody and lending, while the latter is predominantly focused on assets that are pegged to a fiat currency or another asset, such as stablecoins.

A salient feature of these regulations is the directive that mandates all DPT service providers to be registered with the Financial Conduct Authority (FCA). The underpinning rationale is anchored in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs). These are intricate by design and compel DPT service providers to uphold stringent standards to combat the dual threats of money laundering and terrorist financing. This translates to rigorous customer due diligence, monitoring of transactions, and meticulous record-keeping, especially in scenarios where activities appear suspicious. The mantle of ensuring compliance with the MLRs rests with the FCA.

Expanding the horizon further, there is the inclusion of a financial promotion regime specifically for DPT services. This is orchestrated to integrate the Financial Services and Markets Act 2000 (FSMA) within its scope. The FSMA has always been instrumental in regulating the promotion of financial products and services to consumers in the UK, ensuring they are transparent, accurate, and devoid of misleading information. The implications of this integration are multifaceted. It means DPT service providers will now be obligated to provide clear risk warnings, assess the suitability of consumers, instate a cooling-off period, especially for those new to the investment landscape, and disallow certain incentives that might be deemed inappropriate.

Moreover, there are plans to introduce a market abuse regime, which will widen the reach of the Market Abuse Regulation (MAR) to include DPT service providers. This will scrutinize practices that include but are not limited to, insider trading, manipulation of the market, and unauthorized dissemination of information. This initiative is primarily to clamp down on deceptive activities that encompass tactics like spoofing, front-running, and the notorious pump-and-dump strategies that have plagued many an investor.

In the realm of consumer protection, the introduction of a statutory trust requirement is noteworthy. What this signifies is that by the close of 2023, service providers would need to hold the assets of customers in a trust arrangement. On this front, the FCA is in the process of formulating guidelines.

The landscape, with the advent of these regulations, becomes a double-edged sword for crypto businesses aspiring to set their footprint in the UK market. While clarity is a boon, the challenges are manifold. Non-compliance or even partial adherence could lead to businesses having to restructure their operations, which could span from customer due diligence, and transaction monitoring to rethinking their promotional strategies.

For the consumer, the landscape is both protective and cumbersome. While they will be cushioned by enhanced protective measures, they would also need to wade through increased verification processes and other regulatory protocols.

One of the foremost challenges is the delineation of DPT services. There might be grey areas when it comes to categorizing certain cryptoassets or services under the DPT umbrella. Additionally, challenges on the jurisdictional front arise as the actual enforceability of these regulations on businesses based overseas remains to be seen. Lastly, adaptation by the industry is pivotal. The crypto industry, which has been relatively unbridled, might encounter resistance when adapting to these norms.

The trajectory of the UK’s cryptocurrency regulations, while poised in the right direction, necessitates a harmonious effort from regulators, businesses, and consumers to ensure a seamless transition and integration.

Source: https://intpolicydigest.org/navigating-the-uk-s-cryptocurrency-landscape/