Good morning Here’s what happens:
Prices: The history of cryptocurrencies has been so varied this year that it is difficult to pinpoint a dominant common thread. BTC comfortably hovered above $27,000.
Takeaways: If the government passes the proposed rules for crypto exchanges, Hong Kong cryptocurrencies will not be what they used to be.
Bitcoin rises slightly and waits
Bitcoin starts the trading day in East Asia up 0.9% to $27,139, while Ether is up 1.5% to $1,849.
Are we in meme coin season? A hedge against risky season? Or a risk-asset season?
It’s hard to say these days.
One day it seems like bitcoin and ether slowly and steadily push higher, then the next memecoin comes along and shoots into the stratosphere. Other days there seems to be a flight to quality. Imagine the data point where the staked Ether hits an all-time high.
Since Ethereum’s Shapella upgrade on April 12, the amount of Ether being staked has skyrocketed, CoinDesk recently reported, with 4.4 million more coins deposited for staking.
All this despite a wait of more than a month to become a network validator, driven by large ether holders looking for passive income and despite expected deflationary forces that could increase the price of ether, resulting in the annual return of 4 Makes -5% an attractive offer.
“After Ethereum’s Shanghai is over and investors have a memecoin hangover, the crypto market is ‘sans narrative,'” wrote Charmyn Ho, head of crypto insights at Bybit, in a note to CoinDesk.
Ho writes that the upcoming Ethereum EIP-4844 upgrade, which boosts transaction throughput via a process called proto-thanksharding, could favor Layer 2 solutions like Arbitrum, Optimism, and promising new entrants like Mantle, potentially marking an “L2 season.” The altcoin market is trending toward bitcoin amid a fluctuating yield curve.
But right now, it’s difficult to pin down the narrative.
“With most coins struggling to break their 20-week moving averages, it seems premature to speak of an upcoming ‘altseason’ or ‘memeseason’,” Ho said. “In fact, we’re still seeing capital moving in the opposite direction Direction – from Altcoins to Bitcoin and Ethereum. As a result, most altcoins fall on their BTC pairs.”
New Hong Kong rules put emphasis on TradFi chops
A few months ago, crypto twitterati believed that Hong Kong’s upcoming virtual asset rules would unleash a geyser of degenerate capital and boost China’s crypto narrative.
After all, Hong Kong was once home to the cryptocurrency’s growth story in its early days. Binance, Bitfinex, Tether, Justin Sun and many other crypto stakeholders and initial coin offering (ICO) teams were once at home in Hong Kong, as the city’s fast-moving and free-flowing markets at full throttle were well-suited to crypto.
It was hoped that all of this would make the Hong Kong crypto scene great again and bring back the fast times of the past.
Currently, most publicly available virtual asset trading platforms are not regulated by the SFC, and the SFC has not announced a list of license applicants.
A look at this draft, which is part of the consultation process, shows that the SFC rejects the notion that crypto in 2023 Hong Kong will be like everything of the past.
Retail can act – after onboarding
Yes, retail investors can trade cryptocurrencies in Hong Kong. But not every retail investor will be able to trade crypto in Hong Kong.
The exact criteria for an onboarding process have not been well defined, but the SFC says the automated trading nature of virtual assets “requires strict requirements.”
According to the SFC, platform operators must ensure the suitability of retail clients through comprehensive onboarding processes, including a risk tolerance assessment and a holistic assessment of an investor’s understanding of virtual assets based on their education, work and previous trading experience.
Platforms are required to set limits on the size of positions, and the exact risk limit is set based on a “know-your-client” process that the exchange operates, according to the SFC.
TradFi licenses have priority
In addition to these exchanges, as with any other traditional Hong Kong financial institution, there will be two key positions: the officer in charge and the licensed agent.
These individuals must generally conform to the criteria used by the SFC for these roles in the TradFi space. You must have a combination of relevant degrees (although there is such a thing for crypto?), management experience and local equivalents of FINRA licenses from the Hong Kong Securities and Investment Institute.
It is understood that many exchanges looking to apply for licenses in Hong Kong, such as Binance, have started hiring ex-TradFi guys who hold those licenses on a massive scale – damn it if it comes to crypto skills .
Exchanges are required to provide financial disclosures
The new regulations require crypto exchanges to maintain a minimum of HK$5,000,000 (US$640,000) in capital at all times and submit monthly financial reports to the SFC that include a summary of both assets (specifically where and when they are deposited) and liabilities such as bank loans or other credit facilities.
After FTX, many exchanges release proof of reserves, a form of on-chain verification, to build confidence in their liquidity. However, they have been accused of missing a key metric: liabilities. It looks like this requirement of the SFC will solve this problem.
Not every token can be listed; Retail will not have stablecoins
Part of the rules proposed by the SFC effectively provide for a 12-month cooling off period between the launch of a token and when it can be listed on regulated exchanges.
“While a 12-month requirement may not have prevented the recent crash of some tokens, this requirement aims to reduce the risk of a reasonably hard-to-detect scam, as well as the potential impact of prior marketing efforts on a token’s price.” First offer,” writes the SFC.
For listed tokens, a smart contract audit must also be carried out by an independent assessor. Additionally, tokens must be large virtual assets included in at least two acceptable indices published by two independent index providers.
However, the SFC said it did not consider it “appropriate” to publish a list of virtual assets suitable for retail trading.
Perhaps the most controversial part of this would be the ban on stablecoins for retailers, as the SFC deems them unsuitable for retailers due to the propensity to run and lack of regulation.
Because rules in Japan – implemented after Mt. Gox – require exchanges operating the company to use third-party custodians that segregate funds, Japanese customers have been able to withdraw cryptocurrencies and fiat currencies from FTX Japan since early February.
But that will not be the case in Hong Kong.
The SFC says the lack of a regulatory regime for custodians of virtual assets would hamper their oversight and enforcement.
FTX’s new CEO, John Ray III, billed just over 6.5 hours for testing and work on what appears to be FTX 2.0 materials in his most recent cycle. Laura Shin, The Cryptopians writer and Unchained podcast host, debated with First Mover. In addition, LUKSO co-founder and chief blockchain architect Fabian Vogelsteller discussed LUKSO’s upcoming mainnet launch. And Bitcoin (BTC) was back above $27,000 — as President Biden and House Speaker Kevin McCarthy walked out of their meeting on Monday without having reached an agreement on the debt ceiling. Ajay Dhingra, Head of Research and Analysis at Unizen, shared his analysis of the crypto markets.
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