Exchanges and other crypto companies have, for the better part of this month, found themselves targets of a clampdown by various financial and market regulators. US-based centralized trading platforms have increasingly featured in the list of afflicted crypto companies, including names like FTX. The global exchange and its US-operating unit experienced liquidity issues in early November before filing for Chapter 11 bankruptcy protection. The collapse of the Bahamas-headquartered exchange resulted in outflows of $13 billion from the sector, according to blockchain data and analysis firm Chainalysis.
On Monday, digital asset manager CoinShares reported the largest weekly outflow of 2023, with nearly $32 million in digital asset outflows between Feb 12 and Feb 18. The institutional crypto fund manager noted that the bulk of these outflows came from Bitcoin-related investment products. CoinShares, whose Q4 report released Tuesday showed over $30 million of assets in FTX, attributed the heavy flow to the heat from regulators on the crypto industry. Notwithstanding the creeping distrust arising from bankruptcies and fraud allegations, centralized exchanges have maintained operations whilst seeking swift compliance. Here are this week’s latest headlines.
Zipmex to join FTX Japan in resuming customer withdrawals
FTX Japan, the Japanese subsidiary of SBF-led FTX group, earlier this week communicated in a press release plans to resume withdrawals through the Liquid Japan platform. The service recommenced on Tuesday, with customers getting access to assets and funds that were locked since November. In addition to reinstating withdrawals, the Japanese subsidiary said it planned to resume other services as soon as possible. FTX Japan is the latest afflicted entity to shake off troubles resulting from the fall of FTX.
In Feb 15 update, Singapore-headquartered crypto exchange Zipmex said it was planning to resume customer withdrawals after it finalizes a deal it agreed with a venture capital firm last month. The South East Asian exchange told its customers last July that it was pausing withdrawals due to a series of uncontrollable factors, including volatile market conditions and the consequent financial difficulties experienced by its principal business partners. The exchange said the decision was to preserve the platform’s integrity and stability.
CEO Marcus Lim confirmed that a rescue agreement in advanced negotiations last November had been signed but has yet to be closed. He said it is progressing well, though. The digital assets trading platform intends to reopen the service by Mar 21. Only creditors who provide the necessary details as required in the scheme documents from investment firm KordaMentha (the scheme manager) by Feb 21 would be considered eligible. Notably, Zipmex has Thai regulators on its back over allegations that it operated as a digital asset fund manager without the necessary approval.
Huobi Global is seeking a digital assets trading license in Hong Kong, CEO says
Hong Kong is striving to become the leading crypto hub in Asia, and Justin Sun’s Huobi Global wants to take advantage of that. In a Monday tweet, the Tron flagbearer confirmed that Huobi has applied for a crypto trading license in Hong Kong as regulators mull over revamping the rules to regulate crypto platforms that service retail customers and investors in the region under a new licensing regime. Sun said the new license would allow the exchange to provide a broader range of crypto options to users that want to trade and invest in a regulated manner.
Local presence
The Tron founder said that alongside the license, Huobi Global plans to establish a local exchange named Huobi Hong Kong. The subsidiary would be focused on servicing deep-pocketed investors while fully complying with local laws governing the offering of trading pairs and other services. In recent months, local regulators in Hong Kong have openly sought to advance the region’s position and status in the digital asset space, but with caution. SFC Chief Executive Officer Julia Leung said the recent issues around crypto exchanges call for global action and the protection of investors from key risks. Moreover, she has in the past indicated that once the ban on retail crypto trading is lifted, investors would only be allowed to trade highly liquid assets.
Hong Kong has been actively working to become a global leader in the crypto market, making it an attractive location for crypto businesses and investors. Crypto exchanges will only be allowed to list eligible large-cap virtual assets such as Bitcoin (BTC) and Ethereum (ETH). With consultations on the proposed measures set to run until Mar 31, the new regime is expected to take off on Jun 1. Huobi’s native HT token gained double-digits hours after the news touching a ten-week high of $6.85. The HT token has since corrected to $5.36, where it was last observed trading.
To learn more, check out our Investing in Huobi guide.
Binance introduces a novel royalty system for Binance Fan Token holders
In other news, Binance this week sent out an update to its fan token platform by introducing a novel royalty system, the Binance Fan Club. Via the club, the Binance Fan Token Platform, which brings together sports teams and players with their fans, will now allow fan token holders to collect Star Points that are redeemable for various perks. These may comprise game tickets, opportunities to meet with players, video highlights of their favorite athletes, and the chance to partake in exclusive dinners.
While fans could gain points via simple activities such as participating in fan token polls or reading up on fan tokens, those who log higher levels of participation would get better rewards. All new users who register with Binance through the Binance Fan Club program and existing Binance Fan Token holders with at least one of LAZIO, PORTO, SANTOS, or ALPINE tokens in their Binance accounts are eligible to receive a Fan Badge as proof of their membership. Further, the launch of the program comes with two promotions worth $38,000 in community rewards to incentivize participation.
Fan Tokens on Binance
Head of NFT and fan tokens at Binance Lisa, He advocated for the role of fan tokens as they have a pivotal role in driving future fan engagement. She said the fan club program could facilitate deeper engagement between fans and their favorite sports teams, including special events like dinners with players or stadium tours. In He’s opinion, fan tokens give sports fans a greater sense of connection to their beloved sports teams by allowing them access to exclusive offers and participation in crucial club-related decision-making processes.
Last June, Binance announced a multi-year partnership with Portuguese international soccer star Cristiano Ronaldo to create new ways for him to interact with his fans and, at the same time, introduce them to Web3 and the world of NFTs. Around the same time, the exchange services provider also got into NFT ticketing, working with S.S Lazio of the Italian league to make the club’s home tickets available as NFTs. Binance has also worked with Portuguese giants Porto and Brazilian outfit Santos, all of which have tokens offered on the Binance Fan Token Platform. Outside of soccer, Binance has a partnership with Formula 1 racing team BWT Alpine and has also continued making inroads in the payments niche.
The exchange revealed in a Feb 22 announcement a joint pilot program with France-based credit card service company Ingenico. Through this program leveraging Binance Pay, users will be able to complete in-store payments in more than 50 crypto assets. Payments will be delivered only in crypto in the current test stage with a crypto-to-fiat solution lined up for Q2 of 2023. If the pilot is successful, the two companies intend to expand the payments solution to two other countries in Europe. Last month, the exchange debuted its prepaid crypto card in Brazil, making it the second Latin American country to receive the card after Argentina.
Coinbase in talks to launch a federally regulated crypto exchange
Coinbase exchange has come under the spotlight this month alongside other exchanges with operations in the US over their offerings, notably staking, which the markets regulator has issues with. Following Kraken’s $30 million fine over its staking service, Coinbase executives came out to defend its similar product offered by the exchange. The exchange CEO Brian Armstrong and CLO Paul Grewal reiterated that the exchange’s staking business is out of harm’s way. Interestingly, Coinbase cited its regulatory position as a supporting factor for its future and current operations in its Q4 earnings report released Tuesday.
The exchange recorded a leap in quarterly earnings despite tracking fewer users during this period. The report showed that the platform beat analyst predictions, recording $605 million in net revenue – a 5% bump from Q3’s 590 million. In contrast to Q4 2021 earnings, when the majority of crypto assets were rallying, the exchange’s reported Q4 net revenue during the same period in the previous year was $2.5 billion. The exchange reported $2.6 billion in net income for the just concluded year, a notable decrease from $3.6 billion in 2021. Transaction volume on Coinbase’s trading platforms came in at $322 million, representing a 12% decline from Q4 while revenue from subscriptions and services rose 34% to $283 million.
Policy is top priority, CEO says
Bank and other state regulators have put the screws on financial institutions, especially those with direct exposure. The exchange’s report described the “subsequent pressure” imposed on banking institutions as counterproductive, adding that the overall approach to regulation is “disjointed”, hence the need for federal legislation and public involvement. On Tuesday, Fox Business reported that the exchange has been identified as a potential exchange partner by the IEX stock exchange, which seeks to create a federally approved exchange platform. The report, citing people familiar with the matter, revealed that IEX Chairman Brad Katsuyama has held discussions with the SEC to receive the green light on the venture.
In January, Coinbase agreed to a $100 million settlement arrangement with the New York Department of Financial Services for failure to adhere to anti-money laundering. The state regulator isn’t the only one that has leaned on crypto companies in the last three weeks. The SEC earlier this month sent a Wells Notice to Paxos over its BUSD stablecoin, which the agency said was an unregistered security. A Tuesday Reuters report detailed that the financial and tech company is looking to reach an amicable solution with the agency after holding constructive discussions. Paxos CEO Charles Cascarilla said the firm intends to continue with litigations in private even as it reiterates that BUSD is not a security.
The post Exchanges Step Up Recovery and Compliance Efforts – Binance, Coinbase, Houbi, and Zipmex Updates appeared first on Securities.io.
