HashKey Hong Kong, the first licensed virtual asset provider in Hong Kong, is set to open its doors to residents for retail trading on August 28. However, there will be limitations on the amount investors can invest in cryptocurrencies using the platform. Investors will only be allowed to invest up to 30% of their net worth, and a risk control warning will be displayed if the limit is exceeded. The exchange cannot validate users’ net worth, so the limit is largely based on self-verification of assets. The exchange will also assess users’ investment background based on information submitted during Know Your Customer verification. Initially, users will only be able to trade Bitcoin (BTC) and Ether (ETH) on HashKey Hong Kong, as the Hong Kong Securities and Futures Commission has not yet allowed margin trading of crypto products or crypto derivatives on regulated exchanges.
Meanwhile, China is cracking down on private blockchain firms operating within its borders. The country is keen to eliminate them, regardless of the consequences. Blockchain projects in China have literal bounties on their heads, with third-party tracking firms tipping off the police on undercover crypto projects in the country. If the tip-off leads to arrest and asset forfeiture, the tracking firm stands to make millions of dollars in commission. This has led to a 400 billion yuan ($55 billion) crypto money laundering bust by Chinese police. After arrest, crypto executives are reportedly intimidated into handing over private keys and access to servers. Police then allegedly get third-party payment processors to “dump” the coins and tokens over-the-counter in exchange for Chinese yuan. The crypto executives are charged with operating a “multilevel marketing scheme,” “pyramid scheme,” or “money laundering,” leading to the seizure of all protocol-related assets by the state. A portion of the funds goes into law enforcement agency revenue.
The crackdown in China has resulted in the termination of several protocols this year, leaving non-Chinese users with funds stuck on these platforms. Chinese Web3 founders are emigrating, and overseas law enforcement efforts are being made to try and recover the “stuck” funds.
Despite the crackdown on private crypto activities, government-led blockchain efforts in China are thriving. On August 18, the first digital yuan central bank digital currency (CBDC) green bond was issued. The bond has a principal amount of 100 million Chinese yuan ($14 million), a term of two years, and a coupon rate of 2.6% per annum. The loan will be used to finance solar panel facility expansion projects in Wuxi.
In the US, the Federal Bureau of Investigation (FBI) announced the identification of 1,580 BTC ($41 million) stolen by North Korean hackers from various projects. The FBI has urged private sector entities to examine the blockchain data associated with these addresses and be vigilant in guarding against transactions directly with, or derived from, the addresses. The agency believes that North Korea will attempt to cash out the stolen funds.
In China, a former vice chairman of the Jiangxi Provincial Political Consultative Conference Party Group has been sentenced to life in prison for corruption and abuse of power in a Bitcoin mining enterprise. The former official operated a Bitcoin mining enterprise under the corporate name Jiumu Group Genesis Technology and amassed over 160,000 Bitcoin miners, despite knowing about the ban on cryptocurrencies. The former official used his public office to secure preferential subsidies, capital, and electricity supply for the mining operation.
Overall, East Asia continues to experience significant developments in the cryptocurrency and blockchain space, with both opportunities and challenges arising in the region.