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Our weekly roundup of news from East Asia curates the industry’s most important developments.

HashKey Hong Kong to commence retail trading 

Crypto exchange HashKey, the first licensed virtual asset provider in Hong Kong, will open its doors to residents for retail trading on August 28. 

According to local news reports, investors will only be allowed to invest up to 30% of their net worth into cryptocurrencies when using the platform. A risk control warning will be displayed if the limit is exceeded. However, Xiaoqi Weng, COO of HashKey, mentioned that the exchange “cannot validate users’ net worth,” and the limit is largely based on “self-verification” of assets. 

Weng also disclosed that the exchange will assess users’ investment background based on information submitted during know-your-customer verification. “[Investment] Beginners are limited in what they can purchase,” said Weng. 

At its debut, users can only trade Bitcoin (BTC) and Ether (ETH) on HashKey Hong Kong. The Hong Kong Securities and Futures Commission has not yet allowed margin trading of crypto products, nor crypto derivatives, among regulated exchanges, Weng noted. 



Dark side of China’s crypto crackdown

It appears China no longer wants any private blockchain firms operating within its borders and is on the warpath to get rid of them, no matter the consequences. The move comes amidst an increase in using crypto as a means of capital flight in an economic downturn.

Local media reports suggest that, legitimate or not, blockchain projects in China have literal bounties on their heads. First, third-party tracking firms tip off the police on undercover crypto projects in the country; if the report leads to arrest and asset forfeiture, the tracking firm stands to make millions of dollars in commission, if not hundreds of millions of dollars, for large-scale projects such as Multichain.

An recent tip-off lead to a 400 billion Yuan ($55 billion) crypto money laundering bust by Chinese police.
An recent tip-off lead to a 400 billion Yuan ($55 billion) crypto money laundering bust by Chinese police. (DouYin)

Then, after arrest, crypto executives are reportedly intimidated into handing over the project’s 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.

Crypto executives are then charged with operating a “multi-level marketing scheme,” “pyramid scheme,” or “money laundering.” If convicted, the charges result in the seizure of all protocol-related assets by the state.

Sources claim that a portion of the funds goes into law enforcement agency revenue. Zhengyao Liu, a senior lawyer at the Shanghai Mankuen Law Firm, wrote:

“In fact, in the past two years, the profit-seeking law enforcement in crypto-related criminal cases, especially in crypto-related MLM cases, has been the main reason people do not trust the case-handling agencies. For example, the ‘contribution’ of crypto-related criminal cases to financial fines and confiscation revenues is more than 50% higher than in previous years in the Jiangsu Province.”

The crackdown has led to the termination of several protocols this year, with little recourse for non-Chinese users with funds stuck on these platforms. Unsurprisingly, it has sparked a wave of emigration among Chinese Web3 founders, and overseas law enforcement efforts to try and recover the “stuck” funds.

The last message sent by Chinese exchange BKEX before its entire platform shut down and its staff nowhere to be found. (BKEX)

e-CNY green bonds debut 

Despite the draconian crackdown on private crypto activities, government-led blockchain efforts in China are doing quite well.

On August 18, the first digital yuan central bank digital currency (e-CNY CBDC) green bond was issued with a principal amount of 100 million Chinese Yuan ($14 million), a term of two years, and a coupon rate of 2.6% per annum. 

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Facilitated by the Bank of Ningbo, the loans will be used to finance a 1.4 gigawatt (GW) and a 1.0 GW solar panel facility expansion project in Wuxi. 

The e-CNY CBDC has been repeatedly “shilled” for much of this year as a means of stimulating domestic spending amidst a financial crisis within the country. In the City of Tianjin alone, e-CNY transaction volumes have surpassed $17.5 billion in the first half of 2023, with over 302,000 merchants accepting the CBDC as a means of payment. 

FBI tracks $41M in North Korean crypto

On August 22, the U.S. Federal Bureau of Investigation announced the identification of 1,580 BTC ($41 million) stolen from various projects by North Korean hackers. The six displayed wallets include funds stolen from the $60 million Alphapo hack in June, $37 million stolen from CoinsPaid in June, and $100 million stolen from Atomic Wallet in June. The FBI wrote: 

“Private sector entities should examine the blockchain data associated with these addresses and be vigilant in guarding against transactions directly with, or derived from, the addresses. The FBI will continue to expose and combat the DPRK’s use of illicit activities—including cybercrime and virtual currency theft—to generate revenue for the regime.”

The agency said it believes North Korea will attempt to cash out the stolen funds. Criminal investigations into North Korean hackers’ role in the Harmony’s Horizon Bridge and Sky Mavis’ Ronin Bridge exploits last year are still ongoing.

Chinese Bitcoin mining magnate sentenced to life in prison

Yi Xiao, a former vice chairman of the Jiangxi Provincial Political Consultative Conference Party Group, has reportedly been sentenced to life in prison by the Hangzhou Intermediate People’s Court for unrelated charges of corruption and abuse of power in a Bitcoin mining enterprise.

According to local news reports on August 22, Yi Xiao operated a 2.4 billion Chinese Yuan ($329 million) Bitcoin mining enterprise under the corporate name Jiumu Group Genesis Technology from 2017 to 2021. Despite knowing about a ban on cryptocurrencies, Xiao amassed over 160,000 Bitcoin miners with other corporate executives and, at one time, 10% of the City of Fuzhou’s entire electricity consumption. 

Xiao was convicted of using his public office to secure preferential subsidies, capital, and electricity supply for Jiamu Group. The former official also used his position to fabricate statistical reports to conceal the operations’ true nature.

Starting this year, China has been cracking down harshly on crypto activities amid a spree of data theft and money laundering incidences involving digital assets. Earlier this month, a Chinese national was sentenced to nine months in prison for purchasing $13,067 worth of Tether (USDT) for an acquaintance.

Yi Xiao awaiting sentencing on charges of corruption and abuse of power (Hangzhou Intermediate People's Court)
Yi Xiao awaiting sentencing on charges of corruption and abuse of power (Hangzhou Intermediate People’s Court)

Zhiyuan Sun

Zhiyuan Sun is a journalist at Cointelegraph focusing on technology-related news. He has several years of experience writing for major financial media outlets such as The Motley Fool, Nasdaq.com and Seeking Alpha.

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SEC and Binance seek 60-day pause in crypto case

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SEC and Binance seek 60-day pause in crypto case

The SEC and Binance filed a joint motion to pause their legal case for 60 days, citing the newly formed SEC Crypto Task Force’s potential impact on regulations.

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Crypto’s onboarding tipping point – can verification keep up?

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Crypto’s onboarding tipping point – can verification keep up?

Crypto’s rapid growth brings new risks. As fraud escalates, can verification technology keep pace? AI, biometrics and regulatory shifts shape the future of secure crypto onboarding.

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Keir Starmer has declared war on £100m HS2 bat shed – but has he got a solution?

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Keir Starmer has declared war on £100m HS2 bat shed - but has he got a solution?

Has Sir Keir Starmer picked a fight with a bat tunnel that – in time – he will eventually discover he just can’t win?

For the last six months, the prime minister has singled out the most hated construction site in Britain for criticism – a kilometre-long, £100m shed to protect bats in Buckinghamshire from the high speed trains of the future.

Sir Keir regularly thunders that this is the emblem of a broken planning system. His chancellor says such things will never happen again. But is their joint political sonar advanced enough to avoid a collision in the coming months?

Recent weeks have seen a slew of announcements from Number 10 to prove they are taking on the “blockers” in order to get Britain building.

But government sources conceded to Sky News they are yet to reveal a plan which would stop such structures having to be built again in future.

Sheephouse Wood is home to several different bat species, including the most northerly known colony of the rare Bechstein's bat. Pic: PA
Image:
The rare Bechstein’s bat. Pic: PA

HS2 will continue to build this bat tunnel, due to be complete in 2027, come what may. A compromise plan – that would see developers pay into a single government-controlled pot – has left experts and industry figures unimpressed, saying it would not stop another bat tunnel.

The experts also warn that they struggle to see how the government prevents future absurd and costly structures without repealing nature and habitat laws we inherited from the EU.

More on Hs2

To roll back on these protections would mean not only war with the environmental movement, but also breaching our trade agreement with the EU – all to get Britain building again.

There is no obvious answer, yet ministers on Monday insisted one is still coming soon.

This comes as today Sky News shows the first ever pictures of the HS2 bat tunnel, showing the scale and breath of the ten-figure development through the Buckinghamshire countryside and taken despite our request for permission to go on site by the government-owned company being declined.

The bat tunnel is due to be completed in 2027
Image:
The bat tunnel is due to be completed in 2027

The prime minister says the tunnel is an emblem of a broken planning system
Image:
The prime minister says the tunnel is an emblem of a broken planning system

By scrambling through trees and trudging through muddy public footpaths, we were able access open space close enough to the structure, to film the site in detail with a drone without crossing into HS2 land – and it makes quite the spectacle.

Three miles north west of Aylesbury, cutting through the countryside like a scar and wedged between two industrial waste incinerators, we show from the sky the roofless skeleton of the kilometre-long shed which will insulate railway tracks being built in Buckinghamshire – and protect the bats.

The aim is to stop a rare breed known as the Bechstein, which lives in an ancient woodland adjacent to the route, from hitting future high speed trains when they run from London to Birmingham.

The entire structure exists so that HS2 can comply with “The Conservation of Habitats and Species Regulations 2017” – a set of regulations which protects rare species, derives from the EU Habitats Directive and remains in force in the UK to this day despite Brexit.

Although often wrongly summarised as meaning “no bat death is acceptable”, regulator Natural England did advise HS2 that to comply with this law, the company would need to maintain the “favourable conservation status” for the 300 bats once construction was complete. No easy feat.

HS2 executives mulled digging a tunnel, noise-based deterrents and rerouting the line, which would slow down the High Speed trains and prove too expensive. They also looked at barriers alongside the railway or a looser netting structure over the railway – but none of these would have been guaranteed to deliver the standard of protection required by law.

But their engineers and consultants advised the cheapest, legally safest route was the shed being built today. And after four years of meetings with the local council, construction began and continues to this day.

Undated handout artist's impression image issued by HS2 of the Sheephouse Wood bat protection structure which will run for around one kilometre (0.6 miles) alongside the wood, creating a barrier allowing bats to cross above the high-speed HS2 railway without being affected by passing trains. Issue date: Thursday November 7, 2024.
Image:
Undated handout artist’s impression issued by HS2 of the Sheephouse Wood bat protection structure. Pic: PA

The government’s growth mission champion, Dan Tomlinson MP, who visited the bat tunnel site with Sky News, said reform is vital.

“We need to find a way to reduce the cost of infrastructure in this country. Yes, protecting our wildlife too. But if we don’t do that, we won’t be able to build and we won’t be able to make this country grow again, which is something that’s been lacking for so long,” he told me.

But can they stop this in future? The government insists the answers will come in as-yet-unpublished future planning legislation and yesterday government doubled down on its ambition.

“Spending vast sums to build a ‘bat tunnel’ is ludicrous,” said a spokesman.

“For too long, regulations have held up the building of homes and infrastructure, blocking economic growth and doing little for nature. That is why we are introducing new planning reforms and a nature restoration fund to unblock the building of homes and infrastructure and improve outcomes for our natural world. This will deliver a win-win for the economy and nature.”

But a nature restoration fund may not provide all the answers, according to experts.

Under this plan, the government is proposing that developers who potentially fall foul of habitat and nature rules give money to a pot to fund delivery of wider strategic projects that help nature, rather than trying to compensate for each potential breach of the habitat regulations.

Undated handout artist's impression image issued by HS2 of the Sheephouse Wood bat protection structure which will run for around one kilometre (0.6 miles) alongside the wood, creating a barrier allowing bats to cross above the high-speed HS2 railway without being affected by passing trains. Issue date: Thursday November 7, 2024.

Lawyers think that the idea of a fund makes sense for groups of projects affecting exactly the same species and habitat, but the majority of problems arise where a single project creates its own issues – as is the case of HS2 and the bat tunnel.

“The concept of pooling funds for a grand compensation project which ticks the habitats regulations box for a number of projects onshore therefore seems challenging,” wrote Catherine Howard from law firm Herbert Smith Freehills.

“It is certainly going to take a lot of time, effort and cost for the government or regulators to think through what sort of onshore strategic compensation might need to be put in place, and then to deliver it.

“Can decisions be made in the meantime reliant on the promise that such compensation will come forward?”.

But if there isn’t a compromise option which appeals to ministers, repealing or downgrading habitat and nature rules is the only option.

This, however, would be likely to put the UK in breach of a number of international treaties, including the Trade and Cooperation Agreement entered into by the UK and the European Union in April 2021 to govern post Brexit relations and maintain a “level playing field”.

Pro-growth pressure group Britain Remade says while promises of stopping future bat tunnels should be applauded, “there is a real risk is that if their planning bill doesn’t include changes to inherited EU law on protected sites and species, we’re stuck with the worst of both worlds: a status quo that stops us building and also fails to protect the countryside”.

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But attempts to change those laws would cross a red line for environmental campaigners. The RSPB, which has 1.2 million members, is already sounding the alarm over the rhetoric from Sir Keir and Rachel Reeves.

Chief executive Beccy Speight told me while some parts of government are taking a “constructive” approach, her organisation would fight any attempt to water down the nature laws.

“I’m am absolutely clear that we can’t go backwards in terms of the protections we already have in place for nature, because nature is on its knees and we need to do something about that,” she told Sky News.

Sir Keir has made ending ludicrous bat tunnels the test of his planning reforms time after time. This could prove a much trickier issue than anyone anticipated.

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