1. Hong Kong Regulatory News This Week

1.1 Hong Kong Officials Visit Europe to Promote Web3 link

On June 3, Christopher Hui, Secretary for Financial Services and the Treasury of Hong Kong, embarked on a visit to the Netherlands, Spain, and Portugal. The purpose of the trip is to promote the robust development of Hong Kong’s fintech sector and to highlight Hong Kong’s financial innovations in building a sustainable Web3 ecosystem. This includes the latest developments in the virtual asset industry, payment methods, and the tokenization of real-world assets.

1.2 HashKey: Hong Kong Regulators to Begin Approving More Cryptocurrencies link

Following the receipt of licenses on June 1, regulatory authorities will begin the process of approving additional cryptocurrencies. HashKey, which applied last year to list more cryptocurrencies, has already received positive feedback and is now undergoing due diligence. It is anticipated that the number of cryptocurrencies available for retail investors could increase in the coming months. Xiao Qi Weng indicated that efforts will also be made to introduce low-risk derivative products for Bitcoin and Ethereum, such as low-leverage contracts, aimed at meeting non-speculative trading needs like hedging and arbitrage.

2. South Korea’s Weekly News

2.1 South Korean Financial Authorities Discover Multiple Troubled Crypto Exchanges Failing to Properly Return User Assets link

South Korean financial authorities have recently conducted investigations into certain virtual asset service providers (VASPs) that are closing or suspending operations, uncovering significant violations. During on-site inspections from May 20 to 23, the Financial Intelligence Unit (FIU) and the Financial Supervisory Service found that 7 out of 10 inspected VASPs failed to properly return users’ assets. Additionally, 3 companies were found to be inadequately guiding users, contacting only those with assets exceeding 1 million KRW (approximately 732 USD). These VASPs have also been criticized for restricting user withdrawals to overseas exchanges or personal wallets and charging exorbitant fees for these transactions. South Korean authorities have stated that they will take strict measures against these violations.

2.2 South Korea’s Financial Services Commission to Establish “Virtual Asset Division” and Complete Personnel Appointments by End of June link

The South Korean Financial Services Commission (FSC) plans to establish a new “Virtual Assets Department” and complete relevant personnel appointments by the end of June to address the forthcoming implementation of the “Virtual Asset User Protection Act” on July 19. This law aims to provide minimum protection for virtual asset users and further promote substantial regulation of the virtual asset market. Additionally, the FSC is currently training investigators responsible for virtual assets, though specific personnel arrangements have yet to be finalized. The FSC may also revise the policy restricting public officials from holding virtual assets to strengthen oversight of activities related to virtual assets.

2.3 South Korea’s Ministry of Justice Announces Inclusion of “Virtual Asset Crimes” in Prosecutors’ Direct Investigation Scope link

The South Korean Ministry of Justice has announced an amendment to the “Prosecutors’ Investigation Crime Scope Regulation,” which includes virtual asset crimes within the scope of direct investigation by prosecutors. The South Korean prosecution will directly investigate economic crimes related to the “Virtual Asset User Protection Act.” According to the amendment, engaging in unfair trading practices within virtual assets will result in a prison sentence of at least one year or a fine amounting to three to five times the profits gained or losses avoided from the crime.

3. Thai SEC Approves Thailand’s First Bitcoin ETF link

The Thai Securities and Exchange Commission (SEC) has approved One Asset Management (ONEAM) to launch the country’s first Bitcoin ETF, named ONE-BTCETFOF-UI. The ETF is scheduled to be issued between May 31 and June 6, targeting high-net-worth individuals and institutional investors with an investment risk level of eight. The fund’s strategy involves investing in 11 leading global funds to ensure liquidity and security, utilizing internationally standardized currency storage. It has also passed reviews by international regulatory authorities in the United States and Hong Kong.

4. Japan’s Financial Services Agency Orders DMM Bitcoin to Determine Cause of Theft and Submit Customer Compensation Plan link

Japanese Finance Minister Shunichi Suzuki addressed the issue of the unauthorized outflow of crypto assets from DMM Bitcoin, stating, “We will thoroughly prevent such incidents from happening again.” According to a representative from the Financial Services Agency (FSA), the agency has issued a report request order to DMM Bitcoin under the Payment Services Act, demanding an investigation into the cause and a plan for compensating affected customers. Previously, DMM Bitcoin reported the theft of Bitcoin worth approximately $300 million from their wallet.

5. Lawyers Interpret Hong Kong’s Eleven Deemed Licenses link

Recently, eleven institutions have been granted deemed licensing status as Hong Kong Virtual Asset Trading Platforms (VATPs). Lawyer Wenqian Wu interprets this status as follows: “Deemed to be licensed” means that the Securities and Futures Commission (SFC) is satisfied that (1) the applicant was providing virtual currency exchange services in Hong Kong before June 1, 2023, and (2) there is a reasonable chance that the applicant can demonstrate compliance with the SFC’s regulations. While applicants can continue operating, their applications are still pending a final decision, and the SFC retains the right to refuse the license.

The criteria for a deemed license are lower than those for an Approval in Principle (AIP). AIP is a preliminary approval given to every SFC license applicant, which allows them to obtain a formal license upon meeting certain standard conditions.

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6. Shenzhen Municipal Financial Regulatory Bureau Issues Risk Warning on Virtual Currency Trading Speculation link

Shenzhen Municipal Committee’s Financial Office issued a risk warning regarding speculative trading in virtual currencies. There has been an increase in speculative activities where some groups use virtual currencies and “overseas digital options” as bait to induce the public into trading speculation. According to the law, citizens are advised:

Virtual currencies do not have the same legal status as fiat currencies.

Activities related to virtual currencies are considered illegal financial activities.

Overseas virtual currency exchanges providing services to residents within China through the internet are also considered illegal.

Participating in virtual currency investment and trading activities carries legal risks.

7. Qatar Sovereign Wealth Fund to Acquire 10% Stake in China Asset Management Co. link

Two sources have indicated that Qatar’s sovereign wealth fund has agreed to acquire a 10% stake in Huaxia Fund, China’s second-largest mutual fund company. The sources mentioned that Qatar Investment Authority (QIA) will purchase the stake from Primavera Capital. They declined to disclose financial details of the transaction. Earlier in March, CITIC Securities, holding approximately 62% of Huaxia Fund, announced its decision to waive its right to purchase Primavera’s current 10% stake, valued at a minimum of $490 million. Qatar’s sovereign wealth fund’s proposal has been submitted to Chinese regulatory authorities for approval. If approved, the transaction would make QIA the third-largest shareholder in Huaxia Fund. Huaxia Fund manages assets exceeding 1.8 trillion yuan ($248 billion) and has launched Bitcoin and Ethereum ETFs in Hong Kong.

8. JPEX Investors File First Claims, Lawyers Cite 6-Year Statute of Limitations for Civil Suits link

In the JPEX case, two victims have formally engaged legal representatives who yesterday filed a lawsuit in the district court against JPEX Group and seven other defendants, seeking recovery of 240,000 Thai Baht or 1.85 million Hong Kong dollars. This marks the first civil claim against JPEX. Zhu Qiaohua, a consultant lawyer at Haochen Law Firm representing the plaintiffs, stated that while criminal investigations are ongoing, civil claims must be filed within a 6-year limitation period. Waiting for the conclusion of the criminal investigation may not allow sufficient time to initiate civil proceedings.

9. Bithumb Subsidiary Bithumb Meta’s NFT Trading Platform to Cease Operations This Month link

South Korea’s Bithumb Meta’s NFT trading platform, NAEMO Market, will cease operations on the 30th of this month. NAEMO World, effectively non-operational since the end of last year, is part of the shutdown. Bithumb Meta is downsizing its workforce, including key developers from NAEMO World, and undergoing structural adjustments. The decision to halt operations stems from prolonged losses amid a downturn in NFT and metaverse-related businesses.

Established in 2022 with a sole investment of 17 billion Korean Won from its parent company, Bithumb Korea, Bithumb Meta received additional investments totaling nearly 10 billion Korean Won (approximately $7.3 million) last year from LG CNS, CJ OliveNetworks, and Dreamus Company under SK Square. Despite its inception, Bithumb Meta has been consistently unprofitable. Sales in 2022 amounted to only 100 million Korean Won, with losses reaching 7 billion Korean Won. In 2023, the company incurred an annual operating loss of 21.2 billion Korean Won, leading to equity method losses for its investors.

10. NFT Project Rivermen Announces Company Owes Employees Unpaid Salaries link

On June 5th, the official account of the NFT project Rivermen announced that due to mismanagement by its operator, Lihua, the company unilaterally declared bankruptcy on July 6th, 2023. Additionally, it illegally terminated employee contracts, leading to unpaid labor compensation totaling 591,692 yuan to date. Rivermen was launched in August 2021 with approximately 10,000 tokens issued. According to Opensea data, it reached a historical peak average transaction price of about 1.2 ETH in March 2023, with a market value of around $20 million. Currently, its floor price stands at only 0.0075 ETH.

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