The government acknowledges that the VASP licensing regime will be more rigorous and comprehensive than those in Singapore, the UK and Japan.
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Category Archives: Web3, Decentralization, DAOs
Hong Kong VASP licensing regime starts March 1, 2023 and will be more rigorous than Singapore, the UK and Japan
Herbert Smith Freehills | Hannah Cassidy | Jun 27, 2022
The government acknowledges that the VASP licensing regime will be more rigorous and comprehensive than those in Singapore, the UK and Japan.
The Hong Kong government has gazetted amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) to enhance Hong Kong’s anti-money laundering and counter-terrorist financing (AML/CFT) regulatory regime. The amendments will be introduced into the Legislative Council (LegCo) for first reading on 6 July 2022. A LegCo brief sets out an overview of the amendments, which follows the consultation conclusions published by the Financial Services and the Treasury Bureau in May 2021 on the proposed changes (see our 2021 briefing).
VASP licensing regime
- A new licensing regime for virtual asset service providers (VASPs) to be administered by the Securities and Futures Commission (SFC).
- It is proposed that the AMLO amendments relating to the VASP licensing regime will come into effect on 1 March 2023.
- Once in force, any person who seeks to carry on a business of providing a virtual asset service (currently limited to operating a virtual asset exchange (VA exchange)) will be required to apply to the SFC for a licence.
See: Hong Kong’s Web3 ‘Mr. Metaverse’ vs. Mark Zuckerberg
Operating a VA exchange entails providing services through means of electronic facilities where:
- offers to sell or purchase virtual assets are regularly made or accepted in a way that forms or results in a binding transaction; or
- persons are regularly introduced, or identified to other persons in order that they may negotiate or conclude, or with the reasonable expectation that they will negotiate or conclude sales or purchases of virtual assets in a way that forms or results in a binding transaction; and
- client money or client virtual assets comes into direct or indirect possession of the person providing such service.
Virtual assets in scope
The broad definition of “virtual asset” (see below) will capture Bitcoin and “altcoins” as expected. Stablecoins and certain governance tokens will also be in scope. While NFTs are not usually recognised as a medium of exchange accepted by the public, it is possible that they may be brought in scope in the future as the Secretary for Financial Services and the Treasury will be empowered to prescribe by notice published in the Gazette whether a particular asset is to be considered a virtual asset under the AMLO.
See: Do Industry Operators, Researchers, and Regulators Agree On How Big Crypto Crime Is?
“Virtual asset” will be defined under the AMLO as a cryptographically secured digital representation of value that:
- is expressed as a unit of account or a store of economic value; and
- either:
- is used (or is intended to be used) as a medium of exchange accepted by the public, for any one or more of the following purposes – (a) payment for goods or services, (b) discharge of a debt, or (c) investment; or
- provides rights, eligibility or access to vote on the management, administration or governance of the affairs in connection with, or to vote on any change of the terms of any arrangement applicable to, any cryptographically secured digital representation of value; and
- can be transferred, stored or traded electronically; and
- satisfies other characteristics prescribed by the SFC by notice published in the Gazette;
Or alternatively:
- is a digital representation of value prescribed as a virtual asset by the Secretary for Financial Services and the Treasury by notice published in the Gazette.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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eBay acquires Manchester-based NFT marketplace KnownOrigin
TechCrunch | Aisha Malik | Jun 22, 2022
eBay announced today that it’s acquiring Manchester-based NFT marketplace KnownOrigin.
- The financial terms of the deal were not disclosed. eBay says the companies have signed and closed the deal as of June 22nd.
- KnownOrigin was founded in 2018 by Andy Gray, David Moore and James Morgan. All three co-founders are joining eBay. The platform enables artists and collectors to create, buy and resell NFTs. eBay say it’s acquiring the entire company, including IP and the team.
- The acquisition comes a month after eBay launched its first collection of NFTs in partnership with web3 platform OneOf.
- The company’s new “Genesis” NFT Collection will feature 3D and animated interpretations of the iconic athletes featured on Sports Illustrated covers over the years. eBay says the surge in the collectibles market led to its first collaboration in the NFT space.
See: EBay Scores NFT business with an assist from hockey legend Wayne Gretzky
eBay CEO Jamie Iannone:
eBay is the first stop for people across the globe who are searching for that perfect, hard-to-find, or unique addition to their collection and, with this acquisition, we will remain a leading site as our community is increasingly adding digital collectibles. KnownOrigin has built up an impressive, passionate and loyal group of artists and collectors making them a perfect addition to our community of sellers and buyers. We look forward to welcoming these innovators as they join the eBay community.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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One of Biggest Bitcoin Mining Firms in Canada, Bitfarms, to Adjust HOLD Strategy
U.Today | Arman Shirinyan | Jun 21, 2022
A global Bitcoin self-mining company, Bitfarms based in Canada, is now "adjusting its HODL strategy" according to the press release to add more liquidity and strengthen its balance sheet.
Reportedly, the company has sold 3,000 BTC for approximately $62 million at the average price of $20,600. The main reason behind the operation was the company's inability to provide funds to finance the equipment.
See: Justin Hartzman: Unveiling the Celsius and 3 Arrows Capital implosions
After the deal was done, the company's total Bitcoin holdings remained at 3,349 Bitcoins with 14 BTC added to the balance every day. Additionally, the Canadian Bitcoin mining company will proceed to reduce the BTC-backed credit facility with Galaxy Digital LLC from $66 million to $38 million.
From now on, the company will no longer HODL its assets produced daily, which means that Bitfarms will most likely create constant selling pressure on the market to provide more liquidity to its balance sheet by increasing the percentage of stablecoins or fiat currencies in their portfolio.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Justin Hartzman: Unveiling the Celsius and 3 Arrows Capital implosions
Justin Hartzman on Medium | Jun 22, 2022
The markets have been absolutely brutal. Over the last month, we have seen a stablecoin provider, a leading lending provider, and one of the biggest crypto hedge funds implode entirely. We have discussed Terra’s implosion in the past. Today, let’s focus on Celsius and 3 Arrows Capital (3AC). The truly remarkable thing here is that we are in entirely uncharted waters as far as crypto is concerned.
We have never seen so many institutes implode at the same time. Strangely enough, I believe this could be good for the market in the long term. We will get to that later. However, first a quick intro.
What are Celsius and 3AC?
So let’s start with Celsius. Founded in 2018, Celsius was one of the biggest lending platforms in crypto. In May 2022, they had more than $8 billion lent out to clients and $12 billion in assets under management. What made them truly attractive was the incredible APR they offered on collateral. Celsius has been using client funds on various DeFi protocols like Lido, Curve, and — wait for it — Terra’s Anchor Protocol — to generate this yield. On-chain analytics platform Nansen has already identified the wallets that made these trades. When Terra imploded, Celsius CEO Alex Mashinsky quickly pointed out that they had pulled their position safely out of Terra.
See: Terra’s crash shakes confidence leaving some other stablecoins on shaky ground
On the other hand, 3AC is one of the most well-known venture capitals in the crypto space, founded by Su Zhu and Kyle Davies. 3AC is known for being one of the biggest borrowers in DeFi. During the market’s peak, 3AC had holdings worth $10 billion, including Lido, DYDX, Bitcoin, Ethereum, and….yup… Terra. 3AC borrows from every major lender out there, like — BlockFi, Genesis, Nexo, and Celsius. Inevitably, they are all going to suffer due to 3AC’s implosion.
There is one more interesting thing happening in the background that we need to look into before proceeding.
What is stETH?
As you know, you can stake your ETH in the beacon chain to be a validator. Each entity must stake at least 32 ETH to become a validator in Ethereum PoS. There are two ways that you can do this. Buy 32 ETH and stake it. Or create a pool and stake 32 ETH.
The DeFi protocol, Lido Finance did something super smart. They took ETH from their users to stake on the beacon chain. In return, they issued a new token called stETH (staked Ether), pegged 1:1 with ETH, and gave it to the user. This strategy worked very well for Lido, making it the most dominant entity in PoS Ethereum. stETH is a popular token in DeFi applications. Both Celsius and 3AC had significant exposure to stETH.
However, just a few weeks back, the stETH:ETH peg broke.
See: Vitalik: Designing Principles-based Stablecoins that (may not) collapse
The reason this peg broke is because of stETH relative liquidity when compared to ETH. The max addresses holding stETH never exceeded 65,000. Obviously, this is a low number when compared to addresses holding Ethereum.
As such, the daily trading volume for stETH is significantly lesser than ETH, making it a more illiquid asset. Now, if some whales decide to dump their stETH, the lack of liquidity could bring the asset’s price down. This is precisely what happened when some players chose to sell off their stETH. For example, Alameda — a major trading firm with close ties to FTX and SBF — dumped $88 million worth of stETH.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Unicorn CEO sees distributed work as the future
IMD | Jun 20, 2022
Helping organizations hire talent from anywhere will give new opportunities to workers living outside of the world’s wealthiest cities and reduce our impact on the climate
Oyster is a global employment platform that allows companies to hire remote workers anywhere in the world. Every aspect of the employment process can be administered through the platform - from local legalities that govern contracts to payroll rules and health and pension benefits. The onboarding time and cost saved by corporates who use the platform is considerable, said Jamous.
We enable our customers to grow rapidly and efficiently by tapping into a globally diverse talent pool. What used to take months can happen within weeks on the Oyster platform. Hiring outside tier-one cities enables a reduction in headcount costs of anything between 30 to 70%, while bringing people in some countries life-changing salaries. We also enable them to deliver equity and fairness consistently across geographies.
See: Pros and Cons of a Distributed Workforce
Oyster’s one-stop shop offers its clients the prospect of hiring anywhere in the world, thereby saving them money, while extending opportunities way beyond their home territories. According to Jamous, the platform offers a much-needed solution in the current macro-economic climate, where organizations are being urged to reduce overheads and create efficiencies.
“Capital has become more expensive and macroeconomic conditions have changed. It has become a question of how to pivot the strategy from ‘growth at any cost’ to ‘efficient growth"
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Lawyer Says SEC’s New Crypto Cops Are Coming for DeFi
Roll Call | Peter Feltman | Jun 14, 2022
The Securities and Exchange Commission’s decision to beef up its cryptocurrency enforcement staff could signal new worries for digital asset exchanges and others in the industry, as the agency broadens its view of whether some cryptocurrencies are securities. The SEC has plenty of potential targets, including non-fungible tokens, stablecoins and platforms that might come under the agency's authority if they trade digital tokens that are securities
- It will add 20 enforcement positions dedicated to crypto, boosting the total enforcement staff focused on digital assets to 50
- Those tracking the development say the agency will delve deep, looking for violations among a crop of startup ventures.
See: DeFi Advocates Call out the SEC (Again) over attempts to define ‘Exchange’
Ian McGinley, a partner at Akin Gump Strauss Hauer & Feld LLP, said he expects special scrutiny on one of the newest areas of digital assets: decentralized finance platforms, called DeFi for short. These ventures often use the decentralized structure to establish peer-to-peer markets, in which users engage in financial transactions with other parties directly, without an intermediary such as a stock exchange or bank.
- He pointed out that SEC Chairman Gary Gensler has already said the agency is examining them. A small number of DeFis handle much of the total activity in the sector. According to Gensler, the top five DeFi platforms account for about 80 percent of the total trading on all platforms.
- If in fact the decentralized platform is controlled by a small group, I think you are likely to see some actions.
- If an exchange is purely decentralized, then it is very hard for the SEC to make the case that the exchange is selling securities.
- Expects the SEC to pursue cases against non-fungible tokens, which some consider to be the strangest new development in digital assets.
- With NFTs, an investor or customer buys a marker on a distributed ledger that is attached to artwork or music. The owners of NFTs don't always own the original items, just the digital marker.
- The NFT structure can be used in other ways, however, such as to represent shares of a company or to serve as currency in video games.
See: SEC Considering 50 Rule Changes: “One of the largest regulatory agendas in years”
“It's highly likely we will see some SEC enforcement in NFTs, especially since we’ve seen some state regulators recently take action against some NFT projects for selling unregistered securities,” McGinley said.
SEC Commissioner Hester Peirce has said that fractional NFTs, which represent shared ownership, might be securities, though she said additional guidance from the agency would be helpful.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Code is Law Case: A Hamilton teen ‘hacked’ US$16 million in crypto (while he may not be in the wrong)
FP | Ethan Lou | Jun 15, 2022
On Oct. 14, 2021, a DeFi platform (everything is code) called Indexed Finance had a weakness in the code that a Hamilton teen and mathematics guru (he was already completing a master's degree in mathematics at Waterloo University), Andean Medjedovic manipulated into letting him buy coins at an extreme discount, whisking away crypto worth US$16 million, as he would later publicly admit.
The proponents behind Indexed Finance sued Medjedovic. So did some users of the platform who lost their money as a result, saying he had “hacked” the project.
But Medjedovic has said he never improperly accessed anything he wasn’t allowed to. Some software developers have a Code is Law ethos, and Medjedovic said he did only what the project’s publicly available rules allowed him to do.
The central tenet of DeFi is that humans are the weak points in any system. That thinking, though, forgets that code is a human product, and as such it inherits human weaknesses that can be exploited.
See: Alleged US$16 million crypto theft case to test ‘Code is law’ defence in Canada
Even Justice Fred Myers in the Toronto case has said the matter raises “an interesting, timely and important issue about the relationship between the common law and blockchain technology.” Benjamin Bathgate of McMillan LLP, acting for an unnamed Indexed Finance user or group of users, has said the case could be the first to test the issue of whether code truly is law.
But, for now, the case might never delve any deeper into that issue.
That is because Medjedovic has apparently packed up and ran instead of dealing with the civil lawsuit. Justice Myers has issued an order for his arrest, and the case is effectively stalled until Medjedovic is found.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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