First Mover Asia: Crypto Legislation, Enforcement Highlight a Busy Fall for Financial Regulators; Bitcoin Holds Steady Over $19K

Good morning. Here’s what’s happening:

Prices: Bitcoin held its most recent perch over $19,000, despite the latest hawkish comments from Federal Reserve officials.

Insights: Financial regulators in Asia face a Fall season of crypto reckoning.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover,our daily newsletter putting the latest moves in crypto markets in context.

Bitcoin Holds Firm Over $19K

By James Rubin

Bitcoin spent a second consecutive day firmly embedded above its most recent, $19,000 support line.

The largest cryptocurrency by market capitalization was recently trading over $19,350, nearly a percentage point higher than where it stood 24 hours ago as investors weighed the latest hawkish comments by U.S. central bank officials. With only a couple of blips, bitcoin has spent much of the past two weeks hovering over $19,000.

Ether, the second largest crypto by market cap and token of the Ethereum blockchain, was recently changing hands above $1,600, up 0.8% from a day earlier. Ethereum’s Merge, which will shift the protocol from proof-of-work to a more energy-efficient proof-of-stake protocol, and has excited investors, is roughly a week away.

Other major altcoins spent much of the day in the green with LINK and SOL recently up more than 8% and 5%, respectively.

Crypto prices followed a recent trend in tracking stocks, which closed higher on Thursday. The tech-heavy Nasdaq, S&P 500, which has a big tech component, and Dow Jones Industrial Average (DJIA) all climbed more than a half-percentage point as markets seemed untroubled by the latest statements from Fed Chair Jerome Powell, who reiterated the bank’s commitment to tame inflation on Thursday at an event organized by the libertarian think tank, the Cato Institute. “History cautions strongly against prematurely loosening policy,” Powell said.

The release next week of the latest Consumer Price Index (CPI) will show if the Fed has made progress in its inflation fight, although most observers of monetary policy expect the bank to raise interest rates a robust 75 basis points for a third consecutive time. Faced with soaring prices across the continent, the European Central bank on Thursday boosted its rate by this increment for the first time since it it began setting monetary policy in 1999.

In a bad news is good news data point, mortgage rates increased to their highest level in almost 14 years, the latest sign of the sort of cooling economy that the Fed is seeking. The 30-year fixed mortgage rate is now approaching 6%, about double where it stood a year ago, a weekly report by mortgage provider Freddie Mac showed.

In crypto news, Powell repeated his position that the Fed does not want to interfere with crypto innovation but that regulation is important. Powell stressed the need for proper regulation of stablecoins if these are to have the properties of money such as clarity, transparency and full reserves. “I don’t think you want to take money and make it into just another consumer product where sometimes it fails and sometimes it’s good,” he said.

In an interview with CoinDesk TV’s First Mover program, Andre Portilho, head of digital assets at Brazilian financial services firm BTG Pactual, also highlighted the need for smart rules. “Regulation needs to evolve,” Portilho said, referring to comments by SEC Chair Gary Gensler who appeared earlier in the program. He added: “We need actually better regulation and more modern regulation in order for the technology benefits and gains [to] come to the market.

A Fall Season of Crypto Reckoning in Asia?

By Sam Reynolds

This summer was a busy one for the enforcement arm of the U.S. Securities and Exchange Commission (SEC), as it pursued four crypto-related cases that ranged from insider trading at Coinbase, to crypto-related Ponzi schemes, and the all-time classic ‘selling unregistered securities.

In Asia, regulators are preparing for an equally busy fall with everything from legislation to enforcement action on the table.

The crypto industry likes to think of itself as being ‘everywhere but nowhere.’ Register in a friendly jurisdiction, and provide service through the worldwide web is the prevailing mantra.

But South Korean authorities don’t like the idea. The Korea Financial Intelligence Unit (KoFIU) is targeting 16 crypto exchanges for conducting “illegal business activities” by operating in Korea without a proper virtual asset service provider (VASP) license.

It’s yet to be seen what Korean authorities will do about this. Regulators in Ontario faced a similar situation with KuCoin, which was accused by the OSC of selling unregistered securities to residents of the province.

Seychelles-registered KuCoin is said to have been uncooperative with the investigation, questioning the regulator’s authority over them and ghosting them entirely. Time will tell if they do the same with Korean authorities. Meanwhile, South Korea’s Financial Services Commission (FSC), the parent organization of KoFIU, wants crypto legislation fast-tracked through the country’s National Assembly to give it a post-Terra tool kit to deal with the crypto landscape.

There are 13 proposals for new crypto legislation waiting, CoinDesk previously reported, including the country’s upcoming digital asset framework, the Digital Asset Basic Act.

Thailand

Thailand isn’t considered a traditional financial hub in Asia, but its banks and trading community have enthusiastically embraced crypto. Siam Commercial Bank, for instance, has a $50 million blockchain fund and in early 2022 was using Compound to generate yield.

And for a non-financial hub that name isn’t exactly associated with good governance. Its regulator has been proactive in creating a rules-based crypto market that looks to protect consumers. Last year, the regulator banned NFTs and meme tokens from local exchanges as they have “no clear objectives or substance.”

Now, the central bank, in conjunction with the SEC, is set to get a complete regulatory toolkit as lawmakers prepare to debate a crypto framework in the nation’s parliament.

It should be noted that Thai authorities aren’t trying to ban the retail trading of crypto. Thai SEC Secretary-General Ruenvadee Suwanmongkol has been quoted as saying that the commission’s mandate is to “provide more protection for small investors, some of whom are putting most of their savings into these assets.”

This is far removed from Singapore’s approach, which is an outright ban ( although officials say that enforcing such a ban isn’t realistic). For instance, while Thailand regulates retail-focused crypto advertising to ensure that risk disclosures are present and numbers in the adverts are accurate, Singapore bans it entirely.

Thailand regulators are going to have a complicated case in the coming weeks regarding Zipmex, a Thai-based but Singapore-registered exchange that had to temporarily suspend withdrawals earlier this year because of exposure to debt that souredduring the broader market downturn.

Thailand’s SEC wants the police to compel Zipmex to hand over key documents. But Zipmex says those documents are contained within its Singapore entity, which is not under the jurisdiction of Thai authorities.

Another case of crypto companies wanting to be everywhere but nowhere.

Singapore

Singapore is the de-facto crypto hub of Asia, but regulators in-country aren’t all that comfortable with the term.

They would much rather it be the region’s digital assets hub, a term that encompasses crypto but also includes digitized financial products like security token offerings (STOs). Institutional crypto is alright, but retail is a hard no.

“Yes to digital asset innovation, no to cryptocurrency speculation,” is how the director of the Monetary Authority of Singapore put it in a recent speech.

Perhaps part of the hostility regulators have towards crypto is that as a hub, Singapore’s institutions must work through crypto’s biggest problems. Singapore’s judicial system is tasked with helping clean up the mess left behind by Three Arrows Capital. Many of the world’s Web3 projects are registered in Singapore, despite their presence in the city being little more than a post office box or a rented desk at a co-working space. Terraform Labs comes to mind, as does Three Arrows Capital.

As a result, tighter regulations are coming. The Monetary Authority of Singapore is attempting to do a voluntary audit of crypto firms that have a digital payments license to determine how exposed they are to other firms, especially with lending and borrowing.

The exact details of Singapore’s new crypto legislation are expected in the fall, probably around the time of the city’s Token2049 crypto conference.

If there’s a clue to what it might entail, one could look at a recent quote from Ravi Menon, managing director of the Monetary Authority of Singapore.

“Cryptocurrencies have taken a life of their own outside of the distributed ledger and this is the source of the crypto world’s problems,” he said during a recent speech.

Practising Law Institute: The SEC Speaks in 2022

9:30 a.m. HKT/SGT(1:30 a.m. UTC): China consumer price index (August MoM/YoY)

In case you missed it, here is the most recent episode of “First Mover” on CoinDesk TV:

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