Tag: cryptocurrency

  • Why the crypto industry is unhappy about Hong Kong’s stablecoin issuance licenses

    Why the crypto industry is unhappy about Hong Kong’s stablecoin issuance licenses

    In fairness to the Hong Kong Monetary Authority (HKMA), it is rare that the digital assets industry is satisfied with regulations. Crypto firms want regulations that provide them with the legal and safety benefits enjoyed by the rest of the financial industry without slowing down their preferred breakneck speed of development or putting them at a disadvantage vis a vis incumbents.

    When it comes to stablecoins, it has become clear that the HKMA favors a cautious, gradualist approach that the digital assets industry sees as restrictive. The comprehensive licensing regime launched in August 2025 requires issuers of fiat-referenced stablecoins (FRS) to be licensed while maintaining strict reserve management, capital adequacy, and anti-money laundering (AML) standards. Senior management, including the CEO and “stablecoin managers,” are required to reside in Hong Kong, which increases operational costs and complicates the model for global firms. Stringent Know-Your-Customer (KYC) rules apply to transactions as low as HK$8,000 (about US$1,000), which experts say may limit near-term profitability.

    In an April press release published after it granted the first two stablecoin issuance licenses, the HKMA said that its regulatory regime “underscores the HKMA’s commitment to establishing a robust, risk-based and agile regulatory framework that adheres to the principle of ‘same activity, same risks, same regulation’ and aligns with international regulatory standards. This ensures financial stability, combats money laundering, and protects investors.” 

    The HKMA received applications from a total of 36 entities as of the deadline of September 30, 2025. Of those 36 applicants, it selected what almost certainly were the two safest possible choices: Anchorpoint Financial (a joint venture of Standard Chartered Bank, HKT and Animoca Brands) and the Hong Kong and Shanghai Banking Corporation. (HSBC). Standard Chartered and HSBC are the two largest banks in Hong Kong and among the three banks that issue Hong Kong banknotes (Bank of China is the third). 

    Given the HKMA’s priorities for stablecoin issuance, it is not hard to see why it chose a Standard Chartered-backed business and HSBC for the first two licenses. Industry, however, is disappointed. There was an expectation that at least three licenses would be issued and that the recipients would hail from a wider variety of backgrounds. 

    A recent post on Binance Square noted that the list of failed applicants include included not only Yuancoin Technology, founded by former HKMA Chief Executive Norman Chan, but also JD.com’s CoinChain, a former sandbox participant, and OSL, Hong Kong’s largest licensed virtual asset exchange. “Those institutions that harbored strategic ambitions and brought in hot money to try and expand their territory in the digital currency wave ultimately suffered a complete defeat,” the post said, adding that as far as regulators are concerned, “stablecoins have never been a business, but rather an infrastructure. And infrastructure is destined to be entrusted only to those ‘their own people’ who know them best.”

    A key problem here is that while Hong Kong has ambitions to be a digital asset hub, it is already a mature financial center and advanced economy. On the one hand, the city has high-speed, low-cost traditional payment systems. Unlike countries with high inflation or poor financial infrastructure, Hong Kong’s traditional banks already handle cross-border payments efficiently. On the other, since 1983, the HKD has been pegged to the USD, providing a stable, trusted fiat currency for international trade. This reduces the need for a USD-denominated stablecoin (like USDC/USDT) for basic hedging.

    That’s not to say stablecoins do not have a bright future in Hong Kong. The city has been more proactive about developing regulations for the fiat-backed virtual currencies than most other jurisdictions. But the pace of development is going to be slower than the crypto industry would like, with entrenched incumbents likely to benefit more than plucky upstarts. 

  • Is the U.S. having second thoughts about stablecoins?  

    Is the U.S. having second thoughts about stablecoins?  

    It was only a matter of time before the United States had second thoughts about rapidly adopting stablecoins. Even if the White House remains supportive of fast adoption, powerful regulators are less sanguine about the fiat currency-backed cryptocurrencies. 

    In a speech to the Federalist Society on March 31, Federal Reserve Bank Governor Michael S. Barr noted that, Congress in 2025 passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which provides some needed clarity to issuers of stablecoins about how they can fit into the regulatory framework. He pointed out that while there remains much work do by the relevant agencies to fill in the specifics during the rulemaking process, increased regulatory certainty could lead to more rapid development of stablecoins.

    Barr went on to talk about money laundering risks – par for the course when regulators talk about cryptocurrency. Not much to see here. 

    More significant was what he said about financial stability. “Stablecoins will be stable only if they can be reliably and promptly redeemed at par in a wide range of conditions, including during stress in the market that can put pressure on the value of otherwise liquid government debt and during episodes of strain on the individual issuer or its related entities,” he said. 

    “Caution is warranted because we have a long and painful history of private money created with insufficient safeguards.”

    Barr noted that in the early 1800s, during the so-called Free Banking Era, the United States had competing forms of private money in the form of bank notes, which often traded below par. “There were frequent bank runs and even financial panics,” he said. Though improvements were made in the 1860s with the National Banking Acts, financial crises persisted. The particularly severe Panic of 1907, which featured a run on trust companies that offered deposit products backed by less liquid assets, led eventually to the creation of the Federal Reserve System in 1913.

    Beyond these systemic financial risk concerns, incumbent banks are weighing in against crypto firms’ push to allow competitive yields, which they say would create unfair competition. Banks are actively lobbying against proposals that allow such rewards, causing a stalemate in the Senate, with many wondering if legislation can pass before the 2026 election cycle.  

    From what we understand, the Digital Asset Market Clarity Act’s compromise language on stablecoin yield has circulated among crypto and banking industry stakeholders in closed-door Capitol Hill sessions. A Senate Banking Committee markup is now planned for the second half of April, though the text still has plenty of detractors. 

    An equally important issue – and one crypto diehards often overlook – is whether the U.S. needs stablecoins. Unlike emerging markets where banking is often slow or inaccessible, the U.S. has a highly functional payment system. Most consumers and businesses find existing rails (like credit cards, Venmo, or ACH) sufficiently fast and secure, leaving no obvious market gap for stablecoins to fill in the immediate future.

    Research by FIS indicates that approximately 75% of U.S. consumers would only feel comfortable using stablecoins if they were offered by a traditional bank. Most users still view stablecoins with skepticism due to concerns over security, privacy, and past high-profile de-pegging events.

    Banks will undoubtedly be pleased with the FIS survey. It also found that 53.9% of respondents view banks offering stablecoins as a positive development, and the majority want traditional financial safeguards applied to digital currency. 77.4% of survey respondents believe stablecoins should be regulated like traditional payment methods, and 66.3% say FDIC-style insurance would increase their likelihood of use.

    Meanwhile, though the GENIUS Act made important progress in creating a regulatory framework for stablecoins, the rate of adoption in the U.S. will largely depend on how federal and state regulators implement the statute.  

  • Why the UAE is a better crypto hub than Hong Kong

    Why the UAE is a better crypto hub than Hong Kong

    We still remember clearly when Hong Kong abruptly decided it wanted to be a cryptocurrency hub. It was late 2022, and the city, reeling from Covid-19 restrictions, needed to get its mojo back as quickly as possible. The timing was almost comical, coinciding neatly with FTX’s dramatic implosion.

     Almost 3 ½ years later, Hong Kong’s crypto industry has made important strides, mostly in the regulatory space. These include launching a mandatory licensing regime for exchanges (VATP) via the Securities and Futures Commission, approving Bitcoin and Ether ETFs, establishing stablecoin regulations, and allowing regulated retail trading. Overall, these moves have fostered a secure environment for institutional and retail capital.

    While Hong Kong is often compared to Singapore because of geographic proximity and some historic rivalry, it is the United Arab Emirates (UAE) that has emerged as a superior digital asset hub. On the one hand, licensing in the UAE can be faster and more tailored to startups than in Hong Kong, and its 0% tax on crypto trading and mining is attractive. Additionally, the UAE provides direct access to significant Middle Eastern capital, including sovereign wealth funds and family offices.

     Digital assets research firm Chainalysis notes that in the 2024 to 2025 reporting window, the UAE economy received upward of $56 billion in crypto value, growing at 33% annually. While this growth rate is slower than the 86.4% growth rate in the previous period-over-period cycle, it still demonstrates steady continuity in the country’s crypto economy. “The robust expansion of merchant services across smaller transaction sizes indicates that crypto is transitioning from a primarily speculative or investment vehicle to a practical payment solution with real-world utility for UAE consumers and businesses,” Chainalysis said.

    Perhaps most important of all, the UAE seems sure of its crypto ambitions in a way Hong Kong does not. This is not only reflected in the favorable regulatory regime and the broader pro-crypto stance of Abu Dhabi and Dubai; it can also be seen in the high local crypto adoption rate. In fact, at 30%, it is well above Hong Kong’s 3% and the global average of 7%. By the estimates of stablecoin solutions provider Triple-A, the UAE’s crypto adoption rate is the world’s highest.

    In contrast, Hong Kong continues to grapple with mainland China’s tight restrictions on digital assets. Following a Nov. 28 meeting, the People’s Bank of China reiterated that digital assets do not share the legal status of fiat currency and are not permitted as a means of payment in commercial transactions. The PBOC emphasized that under Chinese law, crypto-linked business activity constitutes illegal financial activity.

    Of particular note was the PBOC’s denunciation of stablecoins, which are seeing rapid adoption globally and are on the cusp of mainstream acceptance in many countries and regions—including Hong Kong. “Stablecoins, a form of virtual currency, currently fail to effectively meet requirements for customer identification and anti-money laundering, posing a risk of being used for money laundering, fundraising fraud, and illegal cross-border fund transfers,” the PBOC said in a statement.

    China’s leadership has never been comfortable with decentralized virtual currencies and has instead sought to develop central bank-controlled digital money, the e-CNY. But compared to dollar-backed stablecoins, the digital yuan has much narrower appeal.

    Beijing’s antipathy towards cryptocurrency on the mainland inevitably influences investor perceptions of Hong Kong’s attractiveness as a digital asset hub. While those in the know understand that Hong Kong has plenty of room to experiment with crypto because of the One Country, Two Systems governance model, concerns remain about how the mainland’s restrictions could affect broader crypto market growth.This tension between Hong Kong’s crypto ambitions and mainland China’s restrictions on digital assets is likely to persist, which in the long run could put it at a significant disadvantage compared to the UAE.

  • North Korea’s crypto theft reaches new high in 2025

    North Korea’s crypto theft reaches new high in 2025

    Long known for financial crime, North Korea has become the most notorious crypto-pilfering state actor over the past few years. The Hermit Kingdom operates a sophisticated, state-directed cyber apparatus, known largely through groups like the Lazarus Group.

    North Korea steals cryptocurrency for the same reasons it engages in financial crime involving fiat currency: to circumvent severe international sanctions and fund its nuclear weapons and ballistic missile programs.  According to North Korean state media, the country’s leader, Kim Jong Un, on January 3 called for the doubling of production capacity of tactical guided weapons while visiting a munitions factory.

    However, while the United States managed to crack down hard on Pyongyang’s international money laundering in years past—notably with the freezing of North Korean assets at Banco Delta Asia in 2005—North Korea’s crypto crime is harder to fight. Despite some moves by regulators in different jurisdictions to bring crypto out of the shadows, its ecosystem is still largely separate from the mainstream, regulated financial services sector.

    TRM Labs calculates that in 2025, North Korea was linked to more than half of the US$2.7 billion stolen in crypto hacks. Instead of directly cashing out, North Korea has effectively outsourced this process to what investigators refer to as the “Chinese Laundromat,” a sprawling, opaque network of underground bankers, OTC brokers, money transmitters, and trade-based laundering intermediaries.  These professional money launderers are mainly Chinese shadow-banking brokers who operate across Southeast Asia, buy hacked crypto at a discount, and offer off-chain settlement—often in Chinese yuan. TRM Labs says they “function as high-volume liquidity engines for North Korea.”

    These Chinese money launderers wash stolen assets across chains, jurisdictions, and payment rails, ensuring that the funds are thoroughly laundered before entering the formal financial system.  The fusion of state-directed hacking with industrial-scale laundering has positioned North Korea as the dominant high-value attacker in the cryptocurrency realm today.

    North Korea’s biggest crypto hack of 2025 was also the largest such heist in history. In February, the Lazarus Group stole US$1.5 billion from the Dubai-based exchange Bybit. The hackers used a sophisticated supply chain attack. They compromised a developer’s workstation at Safe (formerly Safe{Wallet}), a third-party multi-signature wallet platform used by Bybit.

    The hackers injected malicious JavaScript code into the Safe user interface specifically for Bybit transactions. When Bybit employees signed off on a seemingly routine transaction to move funds from a secure “cold wallet” to a “hot wallet,” the code manipulated the underlying smart contract logic, redirecting approximately 401,000 Ethereum (ETH) tokens to North Korean-controlled addresses instead.

    Although Bybit CEO Ben Zhou assured clients that their funds were secure and that the exchange covered the losses through its own reserves and partner support, the vast majority of the stolen crypto has not been recovered given the hackers’ sophisticated money laundering capabilities. The incident highlighted significant security vulnerabilities in third-party software supply chains and prompted calls for more robust security measures across the cryptocurrency industry.

    Unfortunately, sanctions are not proving to be effective against North Korea’s crypto crime. While sanctions have been placed on specific crypto mixers (services used to obscure transaction origins) like Tornado Cash and Sinbad, North Korean hackers have adapted to use more complex, off-chain laundering infrastructures that are harder to trace.

    Effectively fighting North Korea’s crypto crime requires a multifaceted approach involving enhanced cybersecurity measures, regulatory compliance, and international public-private collaboration. Rapid intelligence sharing between private sector companies (e.g., crypto exchanges, blockchain analytics firms) and law enforcement agencies is paramount for disrupting illicit activities and tracking stolen funds in real time.Additionally, law enforcement capabilities should be enhanced. Countries should establish specialized task forces and permanent divisions within justice departments dedicated to cryptocurrency investigations, ensuring they have the expertise and resources to pursue cybercriminals across borders.

    Long known for financial crime, North Korea has become the most notorious crypto-pilfering state actor over the past few years. The Hermit Kingdom operates a sophisticated, state-directed cyber apparatus, known largely through groups like the Lazarus Group.

    North Korea steals cryptocurrency for the same reasons it engages in financial crime involving fiat currency: to circumvent severe international sanctions and fund its nuclear weapons and ballistic missile programs.  According to North Korean state media, the country’s leader, Kim Jong Un, on January 3 called for the doubling of production capacity of tactical guided weapons while visiting a munitions factory.

    However, while the United States managed to crack down hard on Pyongyang’s international money laundering in years past—notably with the freezing of North Korean assets at Banco Delta Asia in 2005—North Korea’s crypto crime is harder to fight. Despite some moves by regulators in different jurisdictions to bring crypto out of the shadows, its ecosystem is still largely separate from the mainstream, regulated financial services sector.

    TRM Labs calculates that in 2025, North Korea was linked to more than half of the US$2.7 billion stolen in crypto hacks. Instead of directly cashing out, North Korea has effectively outsourced this process to what investigators refer to as the “Chinese Laundromat,” a sprawling, opaque network of underground bankers, OTC brokers, money transmitters, and trade-based laundering intermediaries. These professional money launderers are mainly Chinese shadow-banking brokers who operate across Southeast Asia, buy hacked crypto at a discount, and offer off-chain settlement—often in Chinese yuan. TRM Labs says they “function as high-volume liquidity engines for North Korea.”

    These Chinese money launderers wash stolen assets across chains, jurisdictions, and payment rails, ensuring that the funds are thoroughly laundered before entering the formal financial system.  The fusion of state-directed hacking with industrial-scale laundering has positioned North Korea as the dominant high-value attacker in the cryptocurrency realm today.

    North Korea’s biggest crypto hack of 2025 was also the largest such heist in history. In February, the Lazarus Group stole US$1.5 billion from the Dubai-based exchange Bybit. The hackers used a sophisticated supply chain attack. They compromised a developer’s workstation at Safe, a third-party multi-signature wallet platform used by Bybit.

    The hackers injected malicious JavaScript code into the Safe user interface specifically for Bybit transactions. When Bybit employees signed off on a seemingly routine transaction to move funds from a secure “cold wallet” to a “hot wallet,” the code manipulated the underlying smart contract logic, redirecting approximately 401,000 Ethereum (ETH) tokens to North Korean-controlled addresses instead.

    Although Bybit CEO Ben Zhou assured clients that their funds were secure and that the exchange covered the losses through its own reserves and partner support, the vast majority of the stolen crypto has not been recovered given the hackers’ sophisticated money laundering capabilities. The incident highlighted significant security vulnerabilities in third-party software supply chains and prompted calls for more robust security measures across the cryptocurrency industry.

    Unfortunately, sanctions are not proving to be effective against North Korea’s crypto crime. While sanctions have been placed on specific crypto mixers (services used to obscure transaction origins) like Tornado Cash and Sinbad, North Korean hackers have adapted to use more complex, off-chain laundering infrastructures that are harder to trace.

    Effectively fighting North Korea’s crypto crime requires a multifaceted approach involving enhanced cybersecurity measures, regulatory compliance, and international public-private collaboration. Rapid intelligence sharing between private sector companies (e.g., crypto exchanges, blockchain analytics firms) and law enforcement agencies is paramount for disrupting illicit activities and tracking stolen funds in real time.Additionally, law enforcement capabilities should be enhanced. Countries should establish specialized task forces and permanent divisions within justice departments dedicated to cryptocurrency investigations, ensuring they have the expertise and resources to pursue cybercriminals across borders.

  • South Asia doubles down on crypto 

    South Asia doubles down on crypto 

    In 2025, the United States was arguably the most prominent cryptocurrency market globally because of the Trump administration’s high-profile moves to regulate digital assets and incorporate them into the mainstream financial system. However, when it comes to actual demand for cryptocurrency, the U.S. is an outlier. Demand for digital assets is growing fastest in emerging markets, with 2 of the top 3 in South Asia and 3 of the top 15 in that region, according to TRM Labs.

    What caught our eye in the survey, which covers the first six months of 2025, is how India is No. 1 and Pakistan is No. 3. Together, those two countries account for about 20% of the world’s population. If they eventually fully embrace digital assets, it will have significant implications for global financial flows—especially if American support for crypto results in broader regulatory acceptance globally.

    TRM Labs notes that South Asia emerged as the fastest-growing region for crypto adoption from January to July 2025, recording an 80% annual increase in transaction volume that reached US$300 billion.

    Despite persistent regulatory ambiguity towards crypto in India, the subcontinent’s demand for digital assets is surging. On the one hand, the success of the UPI payments rail makes the jump to crypto relatively seamless. A strong developer and Web3 ecosystem also foster innovation and local solutions. Additionally, user-friendly online trading platforms and mobile apps like WazirX and CoinDCX have made accessing crypto easy for retail users.

    Perhaps most importantly, India is the world’s largest recipient of remittances, and cross-border payments is one of the most promising financial sector segments for stablecoins. A notable percentage of remittances to India are now estimated to occur via stablecoins (perhaps 3-4%), a trend driven by the large Indian diaspora seeking better exchange rates and faster service.

    In Pakistan, the digital assets market is evolving differently than in India, with Pakistani regulators taking a more proactive approach. Notably, Pakistan recently secured a seat in global rule-making on cryptocurrencies and blockchain governance after Bilal Bin Saqib, chairman of the Pakistan Virtual Asset Regulatory Authority (PVARA), joined the World Economic Forum’s Steering Committee on Digital Asset Regulations. “This participation strengthens Pakistan’s presence in international policy discussions and signals growing recognition of the country’s role in shaping the global conversation on digital asset governance,” the Pakistani finance ministry said.

    In Bangladesh, crypto faces the most challenging market conditions. Indeed, as of 2025, no platforms are licensed to operate legally in the country. While no specific law explicitly bans cryptocurrency ownership itself, Bangladeshi authorities can prosecute related activities under existing legislation if they involve the Foreign Exchange Regulation Act, the Money Laundering Prevention Act, 2012, or the Anti-Terrorism Act.

    Despite the official restrictions, a significant number of Bangladeshis use cryptocurrencies, and actual prosecution for trading or transacting with cryptocurrency is uncommon. This activity often occurs through international exchanges and peer-to-peer (P2P) networks using local payment methods like bKash or Nagad. 

    Between India, Pakistan, and Bangladesh, in 2026 we expect to see the most crypto-related regulatory progress in Pakistan. While the bet might be risky, if Pakistani regulators are right, the Pakistani economy could benefit significantly from regulated digital assets. If the country is seen as crypto-friendly, that could attract more venture capital investment and boost the broader tech startup ecosystem. Indeed, VC giant Andreessen Horowitz recently led a US$12.9 million funding round for Pakistan’s ZAR, a fintech startup that aims to make dollar-backed stablecoins accessible to everyday consumers in Pakistan and emerging markets.

    Further, digital assets offer more immediate benefits to Pakistan than India, given the former’s larger percentage of underbanked citizens and more rudimentary digital payments network. Digital assets can probably also help Pakistanis hedge against inflation, which is a persistent problem given the weak Pakistani rupee, dependence on imports, and high trade deficit.

  • Klarna hops on the stablecoin bandwagon 

    Klarna hops on the stablecoin bandwagon 

    If there was any doubt that the world is in the midst of a stablecoin craze – we hesitate to use that loaded term “bubble” – it should be dispelled by the recent launch of a stablecoin by buy now, pay later (BNPL) behemoth Klarna. 

    In a news release, Klarna explains its rationale for the issuance of KlarnaUSD, which is currently in a testing phase and will be available to the public on mainnet in 2026 – likely the middle of the year. Citing consultancy McKinsey, the Swedish fintech giant says that stablecoin transactions now exceed US$27 trillion a year and could overtake legacy payment networks before the end of the decade. 

    “With 114 million customers and $118 billion in annual GMV, Klarna has the scale to change payments globally: with Klarna’s scale and Tempo’s infrastructure, we can challenge old networks and make payments faster and cheaper for everyone,” Sebastian Siemiatkowski, co-founder and CEO of Klarna, said in the news release. Klarna is the first company to launch a stablecoin on Tempo, a new independent blockchain started by Stripe and Paradigm that’s purpose-built for payments. 

    We aren’t holding our breath for stablecoins to relegate legacy payment networks to the dustbin of history, but we can see why Klarna’s leadership is latching onto stablecoins at this moment. With its core BNPL product facing intensifying competition, Klarna needs new engines for growth now that it is a public company that has to stand up to widespread investor scrutiny. 

    After several years of delays, the Swedish company finally went public on the New York Stock Exchange (NYSE) in September at a valuation of US$15.1 billion, which is about 1/3 of what it was worth in private markets back in 2021. Although the IPO itself was considered successful, the company’s share price has dropped 33% since September as investors worry about Klarna’s ability to generate sustained profits. 

    While Klarna’s third-quarter revenue reached a record US$903 million, its net loss widened to $95 million. Klarna says that it posted a loss mainly due to a US$235 million provision for credit losses, an accounting requirement tied to the rapid growth of its expanding Fair Financing product.

    The U.S. is a key growth area for Klarna, but its credit loss rates are higher there than in its core European markets. This is partly because Klarna must compete more directly with traditional credit cards in the U.S., where its primary users tend to be consumers who need more time to pay.

    Launching a stablecoin does not fundamentally address the issues with Klarna’s current business model, but it could reduce the US$32.7 billion in cross-border fees the company pays, lowering its costs and allowing it to make faster payouts to merchants. 

    But will this be a gamechanger? 

    Maybe not. 

    Indeed, we are skeptical that stablecoins traveling on blockchain-based payment rails – Tempo’s or anyone else’s – are going to pose a serious challenge to the interbank messaging network SWIFT, which has significantly improved the speed of transactions in recent years. Currently, 75% of payments travelling over the SWIFT network reach beneficiary banks within just 10 minutes. The interbank messaging network does acknowledge that “more work is needed at the final stage of a payment’s journey—the last mile—to address friction that delays funds from being delivered to end beneficiaries.” 

    At the same time, stablecoins lack a single, globally accepted regulatory framework. Rules vary significantly by country, creating complexity and uncertainty for large institutions operating across multiple jurisdictions. SWIFT, on the other hand, operates within mature and well-understood legal frameworks.

    Sweden’s central bank notes that the use of stablecoins outside decentralized finance, for example for buying and selling of crypto-assets and use as collateral, is still limited but is growing rapidly in some areas. Whether this development will lead to wider use remains uncertain.

    Time will tell if Klarna’s stablecoin bet pays off.