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Hong Kong split on retail crypto ban; Korean conglomerate on custody | The Daily Forkast

Hong Kong reacts to the region’s pending legislation on limiting crypto investment to professional investors while a conglomerate enters South Korea’s crypto custody scene.

The crypto industry of Hong Kong is split as the region mulls limiting crypto trading to professional investors. While some in the industry applaud the recently published consultation results, some exchanges may be forced to move operations. 

SK Securities — the financial arm of South Korea’s third-largest conglomerate SK Group — joins Kookmin Bank and Shinhan Bank as the number of custody services continue to grow. 

PwC and Elwood Asset Management published its Global Crypto Hedgefund Landscape report, revealing the top three locations for crypto hedge fund managers. Hong Kong ranks third, behind the United States and the United Kingdom. 

We’ll have more on that story — and other news shaping the cryptocurrency and blockchain world — in this episode of The Daily Forkast, May 24.

Transcript

Welcome to the Daily Forkast, May 24th, 2021. I’m Angie Lau, Editor-in-Chief of Forkast.News. Let’s get you up to speed, from Asia to the world.

Another regulatory heartbreak for retail crypto investors in the crypto exchanges that serve them in Hong Kong. Hong Kong is planning to limit crypto trading to professional investors only. To qualify for that status, you have to hold a portfolio worth a little over US$1 million.

According to a 2020 Citibank survey though, that’s just 7% of Hong Kong’s seven and a half million people. Now, Hong Kong has long been seen as a fintech hub and a leader in creating benchmarks for financial ecosystems. It can also be a testbed for the mainland — China, of course. So these new regulations could have broader implications.

“Ashley Alder, the current CEO of the Securities Futures Commission, is the chairman of IOSCO. So other countries will also be looking at this same legislation and say, “Hong Kong’s done this, Singapore has done this, Japan’s done this, and other markets are doing this.”

ConsenSys head of Asia-Pacific Charles d’Haussy says the potential regulations in Hong Kong aren’t necessarily a bad thing, though, and that they could lead to a safer, more structured digital asset economy.

“It’s good to see that the regulators and the industry are working together into additional regulation, additional framework for the industry to get more structure. So I think it’s a normal process. People might have different views on this on this topic, it’s really showing how the industry is maturing, actually.”

But for crypto exchanges like AAX, which operate in Hong Kong, this means reassessing, well, everything. Toya Zhang, COO of AAX told us this: “We expect that most will move operations out of Hong Kong. We are studying the consultation conclusion and we’ll take steps to comply with all local regulations. However, SFC did express the possibilities to open up the crypto market to non-professional investors after a certain period of observation. We hope that SFC will permit exchanges to serve retail users.”

There’s also a sentiment that Asia, once leading the charge in crypto adoption, has been one of the quickest to react to the overheated crypto market.

But regulatory headlines may not always have the impact that it wants. Take a look at South Korea right now. Despite headlines of an anti-crypto government, more custody services are setting up for investors. SK Securities, the financial services arm of the nation’s third largest conglomerate SK Group, is joining the nation’s custody race. Partnering with crypto exchange, GDAC. SK joins Kookmin Bank-backed KODA and the Shinhan Bank-backed KDAC.

So far, only for exchanges in Korea, though, have support from eligible banking partners to apply for a license. So this means the rest may be forced to shut down before the September application deadline.

“Crypto recognition is more stable than the past, so it’s recognized as an asset. For the future survival strategy of banks, they’re interested in cryptocurrencies and the simplest primary service with that is cryptocurrency custody service. Our country’s local banks have been showing interest and they’ve been preparing internal from about a year ago.”

Professor Park tells us that he expects Nonghyup Bank, the nation’s sixth largest lender, is likely next.

Bitcoin changing colors today, closing up a little over 2.3%, 4:00 p.m. local Hong Kong time, ending the day at US$36,744. And in the top ten for cryptocurrencies looking a bit better today. Ethereum up just under 7% and Cardano up 7.2% on the day here in Asia.

PwC and Elwood Asset Management published their Global Crypto Hedge Fund landscape today. According to the report, total assets under management of crypto hedge funds almost doubled to US$3.8 billion in 2020. That’s almost double the US$2 billion in 2019. Most popular location for crypto hedge fund managers is U.S. first, U.K. second, and Hong Kong third.

“And this actually shows that the crypto hedge fund industry is getting not only bigger, but also stronger. However, some things haven’t changed. For example, data shows that today, 84% of investors in crypto hedge funds are either high net worth individuals or family offices.”

Well, some things haven’t changed, others have; the amount of traditional hedge funds now getting into the crypto space. According to the report. 46% representing US$180 billion dollars AUM have or are interested in investing in crypto.

And finally this — remember the viral YouTube video “Charlie Bit Me”? Well, as we first reported last Monday, the family behind it has put the video up for auction in the form of an NFT with the help of origin protocol. Well, now the 24 hour auction is over and the selling price, US$760,000. Not bad for a 14-year-old home movie now an NFT for posterity.

And that’s the Daily Forkast from our vantage point right here in Asia. For more, visit Forkast.News. I’m Editor-in-Chief Angie Lau. Until the next time.