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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”.

www.anndy.com
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EU AI Act: A Significant Step Toward Global AI Governance

EU AI Act: A Significant Step Toward Global AI Governance

In recent years, Artificial Intelligence (AI) has emerged as a powerful tool that has transformed many aspects of modern life, including creating and consuming content. Using generative AI tools like ChatGPT has opened up new possibilities for content creation but has also raised new challenges and questions around copyright. The issue of copyright and AI-generated content is complex, involving various legal and ethical considerations.

As AI technologies become more prevalent in content creation, it is essential to address the questions of ownership, attribution, and compensation for AI-generated works. One of the primary challenges is that existing copyright laws are struggling to keep up with the rapid advancements in AI technology. The current legal framework, designed for traditional forms of content creation, may not be adequately equipped to address the unique aspects of AI-generated content.

Moreover, as AI-generated content becomes more prevalent, it is crucial to consider the ethical implications, particularly around issues such as bias, privacy, and accountability. AI algorithms can amplify existing biases, leading to unfair treatment of certain groups or individuals. Additionally, AI-generated content can raise privacy concerns as it may involve the use of personal data.

To address these challenges, policymakers, industry leaders, and other stakeholders are working to establish clear guidelines and regulations that balance the interests of creators, users, and AI technologies while considering the ethical implications of AI-generated content. For instance, the European Union (EU) is currently drafting the AI Act, a new law aimed at regulating the use of AI technologies in the EU. We will talk more about this in this article.

What is EU AI Act?

The European Union (EU) introduced the EU AI Act in April 2021, proposing a comprehensive legal and regulatory framework for AI. The proposed regulation covers all types of AI in various sectors, including entities that use AI systems professionally. The regulation aims to tackle challenges and risks linked to AI development and deployment, including discriminatory and rights-violating AI.

The EU AI Act primarily puts the responsibility on AI system providers to create a legal framework for developing, distributing, and using AI. The regulation includes broad and general articles to ensure its application across different industries and use cases. The EU AI Act is currently undergoing the legislative process and is subject to the ordinary legislative procedure for the EU. Members of the European Parliament agreed on the AI Act preliminarily in April 2023, and the text is scheduled to proceed to a plenary vote in June 2023. Upon approval, the EU AI Act will be among the first AI-specific regulations in the world.

It is essential to note that the EU AI Act is a significant development in regulating AI systems as it comprehensively and uniformly addresses the associated risks and challenges comprehensively and uniformly. The regulation’s general nature ensures adaptability and applicability across different industries and use cases, marking a significant step towards AI regulation in the EU.

How would EU AI Act help with generative works?

The EU AI Act, a proposed regulation for the use of AI technology, may also help regulate the use of generative works. The act includes provisions on transparency, data quality, and human oversight, which are relevant to developing and using generative AI models such as ChatGPT. In particular, the act would require companies that use AI tools to disclose any copyrighted materials employed in developing their systems. This could help prevent the unauthorized use of intellectual property in generative works. Additionally, the EU proposes requiring companies that provide generative AI services to explain the reasons and ethical standards for their decisions.

It’s worth noting that generative AI tools, like ChatGPT, have also come under scrutiny in other areas. For example, the US Consumer Financial Protection Bureau (CFPB) examines how generative AI tools could propagate bias or misinformation and create risks in the financial services sector. Some experts have pointed out that algorithms used by generative AI tools like ChatGPT could be subject to legal protections similar to those that govern the content on social media platforms like YouTube.

Generative AI was not prominently featured in the original proposal for the AI Act, as it only had one mention of “chatbot” in the 108-page document. However, the act has been revised to include stricter rules for “foundation model” systems, which include generative AI systems like ChatGPT. The revised text also emphasizes the importance of developing European standards for AI, which could help ensure that generative AI models meet the act’s essential requirements for different levels of risk.

Risks and challenges associated with the development and deployment of AI

The development and deployment of AI come with various risks and challenges that must be addressed to ensure its ethical use. One of the main concerns is that AI systems, if not implemented correctly, can violate human rights and discriminate against marginalized communities. Discriminatory AI systems can lead to biased decision-making processes that disproportionately affect certain groups, such as migrants, refugees, and asylum seekers.

Moreover, AI systems that interact with physical objects, such as autonomous vehicles and robots, have the potential to cause harm, making safety and security a significant ethical concern in AI development. The development of AI-generated code can also lead to unintended consequences, and LLMs’ ability to generate functional code is limited, making them powerful tools for answering high-level but specific technical questions.

To address these challenges, the Asilomar AI Principles recommend that AI systems be developed and employed to reduce the risk of unintentional harm to humans. It is also important to ensure that AI systems are designed to be inclusive and transparent and to minimize the risk of unintentional harm to human users.

As the EU and the US are jointly pivotal to the future of global AI governance, it is crucial to ensure that EU and US approaches to AI risk management are generally aligned to facilitate bilateral trade. At the same time, AI developers need to establish safeguards that protect users from potential risks. OpenAI, for instance, has established AI safeguards and has a vision for AI’s ethical and responsible development.

How is the United States looking at AI copyright?

The topic of AI copyright rules in the United States is a complex and evolving issue. Several recent legal cases and proposed regulations shed light on the current state of the law.

One major concern is whether AI-generated works can be protected by copyright law. Currently, most countries, including the US, require a human author for copyright protection to arise. However, ongoing discussions and proposed legislation may change this requirement in the future.

Another issue is the use of copyrighted material in training AI models. Some AI tools are trained on massive datasets that contain copyrighted works without obtaining specific licensing for this use. This raises questions about whether this use constitutes copyright infringement.

Recent legal cases also shed light on the issue of AI copyright rules. For example, Getty Images filed a lawsuit against Stability AI in February 2023, alleging copyright, trademark infringement, and trademark dilution.

In April 2023, the US Supreme Court heard a case that could have implications for AI-generated works. The case concerns fair use law and whether AI tools can be protected under it.

Proposed regulations in the European Union may also have an impact on AI copyright rules in the US. The EU is drafting the AI Act to regulate emerging AI technology, including copyright and intellectual property issues.

In conclusion

In conclusion, EU lawmakers have agreed that companies using generative AI tools like ChatGPT will have to disclose any copyrighted material used in developing their systems as part of a larger draft law known as the AI Act. It is a big move in my opinion.

The complex issue of AI-generated content and copyright requires attention from both legal and ethical perspectives. While debates and lawsuits continue regarding the use of generative AI tools in content creation, it is apparent that current copyright laws are struggling to keep up with technological advancements.

As AI continues to revolutionize content production and consumption, policymakers and industry leaders must collaborate to establish guidelines that balance the interests of creators, users, and AI technologies. These guidelines should provide clarity on issues like ownership, attribution, and compensation for AI-generated content.

It is also essential to consider the ethical implications of AI-generated content, including issues like bias, privacy, and accountability. As AI-generated content becomes more prevalent, it is crucial to ensure responsible and transparent production and use.

To address this issue, policymakers, industry leaders, and other stakeholders must work together to establish clear guidelines and regulations. These regulations should balance the interests of all parties involved and take into account the ethical implications of AI-generated content. This effort is critical in ensuring that AI continues transforming content creation and consumption fairly, equitably, and responsibly.

 

Source: https://www.securities.io/eu-ai-act-a-significant-step-toward-global-ai-governance/

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

Biden’s plan to close crypto tax loss harvesting loophole is a step in the right direction

Biden’s plan to close crypto tax loss harvesting loophole is a step in the right direction

President Joe Biden’s proposed budget plan has caused a stir in the crypto community due to its intention to terminate tax loss harvesting on crypto transactions. The reactions from the community have been mixed, with some perceiving this as an infringement on the freedom of crypto traders while others view it as a necessary step in regulating the industry and curbing tax evasion.

Tax loss harvesting is a technique used to minimize an individual’s tax liability by deliberately selling an investment at a loss to offset present and/or future capital gains. It reduces the amount of tax one pays for selling profitable investments. Although tax loss harvesting is usually carried out manually towards the end of the year, a systematic approach that identifies these opportunities automatically and acts on them throughout the year can be more effective, even for fixed income or income-generating securities. This approach allows individuals to decrease their tax liability by deducting the losses from their taxable income. However, this strategy has come under fire for being a loophole that enables affluent investors to evade taxes. The termination of tax loss harvesting on crypto transactions is estimated to raise up to $24 billion and reduce the deficit by $3 trillion.

Advocates of this proposition contend that it is an imperative measure to promote fairness and equity among taxpayers by ensuring that everyone contributes their fair share. They argue that the current tax system is biased towards the wealthy, who are able to exploit various tax loopholes and deductions to lower their tax bills. This ultimately results in middle-class and low-income earners being unfairly burdened with a disproportionate share of taxes. This imbalance creates an unjust and unequal tax system.

On the other hand, critics of the Biden budget plan assert that ending tax loss harvesting on crypto transactions is ill-advised as it could discourage innovation and investment in the cryptocurrency industry. They posit that this move could prompt some investors to relocate their assets offshore or to other countries with more lenient tax policies, leading to an exodus of talent and capital from the United States. Moreover, they contend that this change could disproportionately affect small and medium-sized enterprises that depend on cryptocurrency investment and trading for their expansion and growth.

The strategy of tax loss harvesting is commonly utilized by investors in the United States as a means of reducing capital gains taxes on their cryptocurrency investments. However, this approach is not extensively used in other countries due to differences in tax policies specific to cryptocurrency investments. For instance, in Canada, cryptocurrency investments are regarded as commodities and are thus subject to capital gains taxes. Meanwhile, in Australia, profits from cryptocurrency investments are also subject to capital gains taxes, with cryptocurrency considered property for tax purposes.

In the United Kingdom, gains from cryptocurrency investments are taxable under capital gains tax, but it is not possible to use losses to offset other gains. On the other hand, in Germany, cryptocurrency investments held for over a year are exempted from capital gains taxes, but those held for less than a year are taxed at the investor’s personal income tax rate. While other countries like Japan and South Korea have also established tax policies specific to cryptocurrency investments, these policies can differ significantly and may be subject to revision over time.Closing the crypto tax loss harvesting loophole could be viewed as a step in the right direction towards regulating the cryptocurrency industry and ensuring tax fairness. However, it is important to weigh the potential consequences of this policy change.

To summarize, I believe that closing the cryptocurrency tax loss harvesting loophole as proposed in President Biden’s budget plan is not a good policy. It could have negative impacts on small investors, innovation, and the market as a whole, while also not generating significant revenue for the government. Rather than this approach, I suggest exploring alternative policies that promote growth and innovation in the cryptocurrency industry while still ensuring that the government can collect revenue.

By Anndy Lian.

The author is an intergovernmental blockchain expert

Source: https://www.financialexpress.com/blockchain/bidens-plan-to-close-crypto-tax-loss-harvesting-loophole-is-a-step-in-the-right-direction/3013562/

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