1. Hong Kong Regulatory News This Week

1.1 Exclusive: Hong Kong Requires License Applicants to Sign Pledge Excluding Mainland Users, Leading to Mass Withdrawal of Applications link

Hong Kong has announced the approval of 11 applicants for virtual asset trading platform licenses. Previously, major exchanges like Binance, OKX, HTX, Bybit, and Gate withdrew their applications. According to WuBlockchain Exclusive, the withdrawals were due to the Hong Kong Securities and Futures Commission (SFC) requiring all applicants to sign a commitment that no entity involved in the application would have users from mainland China. This requirement posed a challenge for traditional offshore exchanges. OKX attempted to form an industry alliance to oppose this demand but was ultimately unsuccessful.

Industry insiders suggest that these entities may reapply in the future with updated legal frameworks or entities, but they will likely be unable to use their current offshore-style branding. The 11 approved platforms are HKbitEX, PantherTrade, Accumulus, DFX Labs, Bixincom, xWhale, YAX, Bullish, Cryptocom, WhaleFin, and Matrixport HK.

This move has sparked criticism. Hong Kong Legislative Council member Duncan Chiu wrote in the Hong Kong Economic Journal that OKX’s exit has led to significant industry debate. He questioned whether Hong Kong is genuinely committed to developing and embracing Web3, pointing out that most of the approved applicants are relatively small in scale. Chiu argued that Hong Kong should not retreat to a safe line from the start, aiming for a completely risk-free approach to innovation.

1.2 Hong Kong Acting Financial Secretary: Will Vigorously Promote Financial Innovation in Key Areas Including DeFi and Virtual Assets Related to Web3 link

Acting Financial Secretary of the Hong Kong SAR Government, Wong Wai-lun, delivered a keynote speech at the 2024 Caixin Summer Summit on May 31, stating that Hong Kong will continue to vigorously promote financial innovation. The key areas of focus include financial technology, green finance, Web3-related DeFi (decentralized finance), and virtual assets. The government will ensure that financial risks remain within controllable levels. Hong Kong will proactively seek new growth points in various fields and develop new competitive advantages.

However, the Hong Kong government has previously emphasized that DeFi will be subject to the same regulatory requirements as traditional financial entities. If a decentralized platform allows trading that constitutes securities or futures as defined by the Securities and Futures Ordinance (SFO), the platform and its operators will need to obtain a Type 7 regulated activity license.

1.3 Tether Co-Founder Brock Pierce Hints at Potential Return to Hong Kong link

SCMP reported that Tether co-founder Brock Pierce hinted at a possible return to Hong Kong, suggesting that China might become more open to cryptocurrencies. While he did not disclose the specifics of his new venture or whether Hong Kong would be its permanent base, he mentioned that Hong Kong remains a part of ongoing discussions. Pierce, who co-founded Tether in Hong Kong a decade ago, revealed that amidst the Hong Kong government’s efforts to attract the cryptocurrency industry back, he is considering working in Hong Kong for the third time.

2. The Mainland of China’s Weekly News

2.1 East China University of Political Science and Law Journal: Prohibition-Based Regulation of Virtual Currency: Legal Reflections and Institutional Optimization link

The East China University of Political Science and Law Journal recently published a paper titled “Prohibition-Based Regulation of Virtual Currency: Jurisprudential Reflections and Institutional Optimization.” The paper notes that while “prohibition-based” regulation has effectively mitigated risks during certain periods, this approach needs urgent optimization and adjustment as the market evolves and the international regulatory environment changes. The article suggests allowing approved domestic financial institutions to engage in specific virtual currency businesses, such as RMB stablecoins, to promote financial innovation.

2.2 Scholar: China’s One-Size-Fits-All Approach Results in Missed Opportunities for Digital Currency Development link

Yu Pinxian, Associate Professor at the Law School of Hebei University, published a research monograph titled “Legal Issues in Cryptocurrency Regulation.” The book asserts that blockchain technology is a “disruptive innovation,” and that China’s complete ban on initial coin offerings (ICOs) is overly stringent. This approach has driven many excellent teams and quality projects overseas or to seek funding exclusively abroad, failing to achieve the intended outcomes. The prohibition has not effectively cut off domestic trading channels and has, to some extent, relinquished control over the industry, preventing the nation from reaping the benefits of enterprise growth. The monograph argues that the simplistic “one-size-fits-all” approach will hinder the development of blockchain technology, causing the country to miss an opportunity for explosive growth through new technology and further research into the development of digital cryptocurrencies.

3. Seoul Prosecutor’s Office Cracks Down on Virtual Asset Price Manipulation and Fraud link

The Virtual Asset Crime Joint Investigation Unit of the Seoul Southern District Prosecutors’ Office is making concerted efforts to crack down on virtual asset crimes that harm public welfare, such as virtual asset price manipulation, unreported virtual asset exchanges, and virtual asset deposit fraud. The legislative provisions of the upcoming Virtual Asset User Protection Act, set to be implemented in July, are also under discussion. The Ministry of Justice has indicated that it is working with the Financial Services Commission and the Financial Supervisory Service to formulate subordinate regulations, such as methods for calculating illicit gains from unfair trading practices in the virtual asset market. These efforts aim to enable swift investigation of unfair trading behaviors and thorough recovery of criminal proceeds in the virtual asset market.

4. Upbit’s Recent Surge in Listings May Be Linked to South Korea’s New July Regulations link

Upbit, South Korea’s largest and the world’s second-largest spot exchange, has listed three tokens — Bounce, Stargate Finance, and BEAM — in the past three days, an unusually rapid pace compared to its previous listing activity. Analysts suggest this may be related to the upcoming Virtual Asset Investor Protection Act, set to take effect in July. The new law will introduce more complex listing regulations and prohibit the listing of virtual assets with a history of hacking incidents.

5. Nomura Securities, Laser Digital, and GMO Collaborate to Explore Stablecoin Issuance in Japan link

Nomura Securities, along with its digital asset division Laser Digital, is collaborating with Japan-based GMO Internet Group to explore the issuance of stablecoins in Japan. The two companies plan to explore the issuance, redemption, and circulation of stablecoins pegged to the Japanese yen and the U.S. dollar. Additionally, they intend to offer stablecoin-as-a-service products, which include regulatory compliance management, blockchain integration, and backend transaction management. Previously, GMO’s U.S. subsidiary, GMO-Z.com Trust, has issued stablecoins on various blockchains, including GYEN and ZUSD.

6. Japanese Crypto Exchange DMM Bitcoin Wallet Hacked, $306 Million in Bitcoin Stolen link

DMM Group’s cryptocurrency exchange, DMM Bitcoin, announced that 4,502.9 BTC has been illegally leaked from its wallet, amounting to approximately $306 million. The incident is currently under investigation to assess the extent of the loss. In response, the group has assured users that it will purchase an equivalent amount of Bitcoin to cover the leaked quantity, backed by the company’s support. Presently, there are restrictions in place affecting account opening, withdrawals, and other services.

7. Abu Dhabi Bans Use of Farms for Cryptocurrency Mining link

Abu Dhabi’s Agriculture and Food Safety Authority has issued a notice prohibiting the use of farms for cryptocurrency mining. Violators could face fines of up to 10,000 dirhams (approximately $2,722). Despite this regulation, the UAE remains a favorable region for Bitcoin mining, with data from 2023 indicating that its Bitcoin mining capacity accounts for approximately 4% of the global hash rate.

8. New Huo Technology Sells All FTX Claims for $19.5 Million, 107.8% of Original Claim Amount link

New Huo Technology, a Hong Kong-listed company, announced that it has agreed to sell all its rights and interests in the FTX claim for 107.8% of the original claim amount, totaling $19.5 million. According to the announcement, Hbit Limited acts as the seller and Ceratosaurus Investors, L.L.C. as the buyer. The seller has agreed to sell, and the buyer has agreed to purchase, all rights, ownership, and interests of the seller in the FTX claim.

New Huo Technology believes that this sale will help avoid the uncertainties and lengthy nature of bankruptcy proceedings, as well as eliminate litigation risks associated with the FTX claim.

9. Notcoin Deposit Delay Sparks Major Upheaval in Bybit Management link

After the delay in crediting Notcoin to user accounts, Bybit’s management underwent significant upheaval with several executives voluntarily resigning. The company publicly announced the recruitment of new technical and spot market leaders. Bybit’s decision to airdrop Notcoin tokens directly to user addresses instead of a centralized exchange address for distribution caused delays for 320,000 affected users who couldn’t immediately sell the tokens. Bybit subsequently pledged $23 million for compensation to those affected.

10. Bitdeer Secures $150 Million Private Funding from Tether link

Bitdeer announced a private placement financing of up to $150 million from Tether. Tether described Bitdeer as one of the most powerful vertically integrated operators in the Bitcoin mining industry, highlighting its cutting-edge technology and robust research and development capabilities. Tether expressed anticipation for future close collaboration with Bitdeer across multiple critical infrastructure sectors.

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