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

Yet another crypto scandal in Hong Kong 

Scammers posing as investment experts allegedly enticed 145 victims to tip $18.9 million into the unlicensed Hong Kong crypto exchange Hounax.

According to reports earlier this week, the police said investors were allegedly promised up to 40% return per annum with “no risk” in its advertisements. After users deposited their funds, they were unable to withdraw them. On November 1, the Securities & Futures Exchange (SFC) of Hong Kong listed Hounax on its billboard of suspicious crypto exchanges but clarified that because Hounax was unlicensed at the time of incident, it was not subjected to the regulatory’s enforcement actions.

This was the second scandal involving a crypto exchange in Hong Kong in recent months. In September, another unlicensed exchange JPEX collapsed after allegations of a Ponzi scheme unsurfaced, leading to 66 arrests and an estimated $205 million in investors’ losses.

Despite the scandals, Hong Kong regulators appear to remain steadfast in their commitment to transforming the city into a major Web3 hub. On November 27, SFC CEO Julia Leung, explained that “even if the grace period ends tomorrow, fraud will still occur, so there is no intention to modify the grace period and other measures for the time being.”

Under current regulations, a grace period for crypto exchanges to operate without registration will end in June 2024. On November 30, the SFC stated that it seeks to legitimize initial coin offerings in the city to create more revenue for the national budget.

A former ad from the defunct Hounax exchange.
A former ad from the defunct Hounax exchange. (Medium)

In other Hong Kong crypto news, the financial institutions, Interactive Brokers and Victory Securities, this week announced they had secured crypto licenses, with the former partnering with licensed crypto exchange OSL to immediately provide Bitcoin (BTC) and Ethereum (ETH) trading services to its Hong Kong clients.

And on November 29, Darryl Chan, deputy chief executive of the Hong Kong Monetary Authority, announced a multinational effort to create a cross-chain bridge for China’s digital yuan central bank digital currency (e-CNY CBDC). Dubbed “mBridge,” the protocol seeks to reduce transaction fees and improve speeds for cross-border uses of the e-CNY CBDC. The first pilot tests will begin in Mainland China and Hong Kong.

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Foreign banks join e-CNY pilot testing

Standard Chartered, HSBC, Hang Seng Bank, and Taiwan-based Fubon Bank have begun testing of the digital yuan in cross-border transactions.

According to local news reports on November 28, the four foreign banks will also integrate e-CNY transfer services for their clients and enable them to deposit and withdraw e-CNY. Personal banking accounts will also support the official e-CNY app and self-custody wallet. Yuesheng Song, president and vice-chairman of Hang Seng China, commented:

“The central bank’s launch of the digital RMB, a legal currency in digital form, is an important step for China to explore the development of digital currency and promote the internationalization of the RMB. Hang Seng China follows the national financial development policy advocacy and actively supports the application and development of the central bank’s digital currency.”

In the first three quarters of 2023, the use of the digital yuan in transactions was up 35% year-on-year, reaching $1.39 trillion, China Daily reported. On November 29, the first-ever e-CNY student loans were issued in the province of Suzhou with $26,230 worth of loans being issued directly into the digital wallets of 13 recipients. 

List of banks supported by the e-CNY app, including Standard Chartered, HSBC, Hang Seng Bank, and Fubon Bank. (Baidu)
List of banks supported by the e-CNY app, including Standard Chartered, HSBC, Hang Seng Bank, and Fubon Bank. (Baidu)

HTX back to normal

HTX exchange (formerly Huobi Global) has reopened deposits and withdrawals after a devastating hot wallet hack that drained the exchange of $30 million on November 22.

According to the November 26 announcement, the exchange has since resumed deposits and withdrawals on the Bitcoin, Ethereum, and Tron networks.

“Huobi HTX once again promises to fully compensate for the losses caused by this attack and 100% guarantee the safety of user funds. The amount of funds lost by Huobi HTX this time accounts for a very small amount of the total funds of the platform,” the exchange said.

The firm has also announced that a special airdrop will take place in December designed to reward its “loyal users.” Airdrop tokens will reportedly come from an “upcoming high-quality projects,” and the amount to be received will be determined by a users’ average net assets on the HTX exchange denominated in Tether (USDT). 

Justin Sun, de-facto owner of the HTX exchange (Twitter)
Justin Sun, de-facto owner of the HTX exchange. Incredibly, Warren Buffett did not convert to crypto following the meeting. (Twitter)

Immediately after the incident, Justin Sun, founder of the Tron ecosystem and de-facto owner of the HTX exchange, commented “we will cover the loss and all assets are SAFE.” Despite assurances, however, this was the fourth exploit involving the HTX ecosystem within the past two months. Around the same time as the HTX exploit, the HTX Ecosystem Chain (HECO) bridge was hacked for $87 million.

On November 10, Poloniex, an exchange acquired by Sun in 2018, was hacked for $100 million due to allegedly compromised private keys. The exchange resumed withdrawals on November 30. On September 25, HTX was drained of $8 million in a security incident. The exchange has since clawed back $8 million in stolen funds and issued a 250 Ether bounty to the hacker. 

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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Budget 2024: Rishi Sunak hints at further national insurance tax cut – citing boost for union

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Budget 2024: Rishi Sunak hints at further national insurance tax cut - citing boost for union

A reduction in national insurance would be a “union tax cut”, the prime minister has said ahead of the budget next week.

Rishi Sunak told journalists at the Scottish Conservative conference in Aberdeen on Friday that while he could not comment on what the chancellor Jeremy Hunt will announce on 6 March, he could see the case for trimming the levy – which is paid by workers across the UK – over income tax.

When asked about the fact a cut in the headline rate of income tax may not benefit voters in Scotland if the SNP government chooses not to pass it on, he said national insurance had been cut in January because it is a “tax on work” and benefits all parts of the nation.

Politics latest: PM delivers Downing Street address

“I’m sure people will appreciate that I can’t comment on any fiscal policy in advance of the budget,” he said.

“But to your broader point, the chancellor and UK government chose to cut national insurance, for lots of reasons but first and foremost because it’s a tax on work and I believe in a country and society where hard work is rewarded.”

He added: “It’s also important to us to be a government that delivers for people in every part of the United Kingdom.

“It’s a union tax cut and a tax cut for everyone in work and the contrast between what we’re doing and what the SNP are doing couldn’t be starker.

“I want to make life easier for people, I want to give them the peace of mind there’s a brighter future for them and their families.”

Jeremy Hunt, pictured at last year's budget, is under pressure to deliver for his parties electoral hopes
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Jeremy Hunt will give his budget on 6 March

Some Conservative MPs have been pushing for a pre-election cut to income tax in the hope of boosting the Conservatives’ flagging popularity.

It was also one of the promises of Mr Sunak’s leadership campaign.

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In Scotland, where the Conservatives are up against the SNP in all of the seats they hold and are targeting, the prime minister has dubbed the SNP the “high tax capital of the United Kingdom”, with Scots earning around £28,000 a year already paying more income tax than those who live in England due to policy decisions at Holyrood.

MSPs passed the final budget for the next financial year this week, including a new income tax band being created, which will see those on a salary between £75,000 and £125,140 paying 45%; while a 1% increase to the highest rate of tax – for those earning more than £125,140 – will take it to 48p in the pound.

In passing the budget, deputy first minister Shona Robison insisted Scotland’s tax system was “progressive” and will provide £500m in funding for the NHS.

Scotland Secretary Alister Jack confirmed he had been lobbying the chancellor for a cut in national insurance – rather than income tax.

Mr Sunak would not comment on reports the government is considering raising revenue by increasing the windfall tax on oil and gas companies, or may force “non-doms” to pay UK tax on foreign income – both ideas Labour has put forward.

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PM rails against ‘extremist forces trying to tear us apart’ in Downing Street address

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PM rails against 'extremist forces trying to tear us apart' in Downing Street address

Rishi Sunak has railed against “extremist forces trying to tear us apart” during a Downing Street address to the nation.

The prime minister said there has been a “shocking increase in extremist disruption and criminality” and added that “now our democracy itself is a target”.

Politics latest: Galloway reacts to PM saying result ‘beyond alarming’

He also described the Rochdale by-election result on Thursday night as “beyond alarming”, and claimed “our streets have been hijacked by small groups who are hostile to our values” as he urged the need to “beat this poison”.

His surprise speech came after the victory of maverick politician George Galloway in the Greater Manchester seat, following a campaign dominated by the highly-emotive issue of Gaza and dogged by accusations of abuse and intimidation.

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Rochdale MP: ‘I despise the prime minister’

In response, Mr Galloway told Sky News he “despised” the prime minister and did not care what he thought as he had won “a free and fair election”.

Community tensions in the UK have heightened against the backdrop of the Israel-Hamas conflict, triggered by the militant attack on 7 October.

In the face of ongoing pro-Palestinian protests, MPs have spoken of their experiences of receiving death threats and their concerns for the safety of their families, prompting the government to announce an extra £31m to protect elected representatives.

It followed chaotic scenes in Westminster over the vote on a ceasefire in Gaza, when Commons Speaker Sir Lindsay Hoyle broke with precedent in his handling of proceedings because he had concerns about the intimidation suffered by some parliamentarians, sparking a backlash.

But critics argue members of the ruling party have stoked divisions, highlighting former deputy Tory chairman Lee Anderson being stripped of the party whip after he accused London mayor Sadiq Khan of being controlled by Islamists, and former home secretary Suella Braverman referring to protests as “hate marches”.

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Mr Sunak said: “In recent weeks and months, we have seen a shocking increase in extremist disruption and criminality.

“What started as protests on our streets have descended into intimidation, threats and planned acts of violence.

“Jewish children fearful to wear their school uniform lest it reveals their identity. Muslim women abused in the street for the actions of a terrorist group they have no connection with.

“Now our democracy itself is a target. Council meetings and local events have been stormed. MPs do not feel safe in their homes. Long-standing parliamentary conventions have been upended because of safety concerns.

“And it’s beyond alarming that last night, the Rochdale by-election returned a candidate that dismisses the horror of what happened on 7 October, who glorifies Hezbollah and is endorsed by Nick Griffin, the racist former leader of the BNP.”

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Protesters descend on MP’s home

He added: “We are a country where we love our neighbours and we are building Britain together.

“But I fear that our great achievement in building the world’s most successful multi-ethnic, multi-faith democracy is being deliberately undermined.

“There are forces here at home trying to tear us apart.”

He went on: “Islamist extremists and far rights groups are spreading a poison, that poison is extremism.”

Mr Sunak announced a “new robust framework” would be introduced to “ensure we are dealing with the root cause of this problem”.

The prime minister said ministers would redouble their support for the anti-terrorism Prevent programme, demand universities stop extremist activity on campus and act to prevent people from entering the country whose “aim is to undermine its values”.

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What happened in the House of Commons?

In an appeal to those taking part in pro-Palestinian protests, Mr Sunak said: “Don’t let the extremists hijack your marches. You have a chance in the coming weeks to show that you can protest decently, peacefully and with empathy for your fellow citizens.

“Let’s prove these extremists wrong and show that even when we disagree we will never be disunited from our common values of decency and respect.

“I love this country, my family and I owe it so much. The time has now come for us all to stand together to combat the forces of division and beat this poison.”

Labour leader Sir Keir Starmer backed Mr Sunak’s call.

In a statement, he said: “The prime minister is right to advocate unity and to condemn the unacceptable and intimidatory behaviour that we have seen recently.

“It is an important task of leadership to defend our values and the common bonds that hold us together.

“Citizens have a right to go about their business without intimidation and elected representatives should be able to do their jobs and cast their votes without fear or favour.

“This is something agreed across the parties and which we should all defend.”

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Electoral Dysfunction: How big a threat is Galloway and Gaza to Starmer’s Labour?

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Electoral Dysfunction: How big a threat is Galloway and Gaza to Starmer's Labour?

George Galloway will be back in parliament on Monday with his megaphone and a new platform to rail against Labour.

His theme is Gaza and his menace is clear.

As he accepted victory in the Rochdale by-election at around 3.30am (at a rally in a Subaru car showroom of all places), the veteran left-wing agitator warned Sir Keir Starmer “[his] problems just got 100 times more serious than they were before today”.

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In Mr Galloway’s world, his win was the beginning of an earthquake that would flatten Sir Keir’s Labour.

“This is going to spark a movement, a landslide, a shifting of the tectonic plates in scores of parliamentary constituencies,” he said.

Labour, he said, was “on notice that they have lost the confidence of millions of their voters who loyally and traditionally voted for them”.

On Electoral Dysfunction this week Jess Phillips, Ruth Davidson and I discuss how much this disruptor will damage Labour and how big the electoral problem of Gaza is for Sir Keir.

It is something that Ms Phillips, who has a large Muslim community in her Birmingham Yardley constituency, feels very strongly about.

She resigned from the Labour frontbench last year after deciding she couldn’t support the party over the Israel-Hamas war.

And she is fuming over what she sees as Mr Galloway’s sanctimony as he purports to be fighting for the people of Gaza when all he really wants to do is to sock it to Labour, as he has been trying to do in various seats for various political parties since he was kicked out of the party more than 20 years ago.

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Ms Phillips said: “He is not a legitimate voice for the people of Gaza.

“He’s just trying to attack Keir Starmer.

“Knock yourself out. Attack Keir Starmer. That’s politics. I’m here for that. But don’t pretend to people who care about something that you’re going to change something.”

Mr Galloway would reject the suggestion he is not a “legitimate voice” for the people of Gaza, having campaigned on behalf of the Palestinian cause for decades. Speaking to Sky News in the wake of his victory last night, he said his views on the issue were “quite well known”.

As for whether Labour would have lost this seat to Mr Galloway regardless of whether its suspended candidate Azhar Ali had stood for Labour or not – a view of some in the party – Ms Phillips says she doesn’t know.

But what she does acknowledge is Mr Galloway’s near 6,000 majority is “testament to a broader problem” for the party.

She said: “There is a clear problem with Muslim communities feeling represented currently by the Labour movement.

“Muslim people do not want to be represented by total charlatans.

“They also want to come to you for help and need decent representation and good, good people, both from within and without their community.

“They have been saying for some time, we are losing faith, if only we noticed it.”

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I don’t buy Mr Galloway’s assertion that he is triggering a “movement” across “scores” of Labour seats – not least because these divisions have been in plain sight for months, with councillors and activists quitting Labour because of the tensions over Gaza.

In some Labour seats it is undoubtedly a real problem, but what doesn’t follow is that these difficulties lead to electoral failure in a general election across a number of seats.

The by-election swings in all other races tell a very different story, with over half of Labour’s biggest by-election swings ever happening in the last couple of years.

“Rochdale was the anomaly and not any kind of indication of where we are,” says one senior Labour figure.

“At the beginning of the [Rochdale] campaign it was clear that some previous Labour voters had moved away from us on the issue of Gaza but at the same time we were picking up a lot of previous Tory voters.”

While Ms Phillips is clearly frustrated with her party leadership over Gaza, Ms Davidson says she feels “a little bit sorry” for Sir Keir, who she thinks had no option but to be fulsome in support of Israel against the backdrop of a Labour party that had been so badly tarnished by the rows over antisemitism in its ranks during the Jeremy Corbyn years.

“I think what the Gaza situation thing has exploded about is the fact that Keir Starmer had so much work to do off of Jeremy Corbyn to try and rebuild trust with Jewish communities across this country,” says Ms Davidson.

“He had to do that if he was going to be a credible candidate for the prime minister of this country; he had to make that reparation.

“And that is now being used against him. The bit [from Galloway’s election flyers], which was about Starmer being this great friend of Israel, is being used as a stick to beat him with.”

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