Sep 28, 2023

Japan is looking into launching its first stablecoins, while some market watchers are getting concerned that Hong Kong is getting cold feet over its friendliness toward crypto.

Video transcript

We are now turning to you, Emily, there are some major developments for digital assets coming out of Asia. Japan is looking into launching its first stable coins. While some are getting concerned that Hong Kong is getting cold feet over its friendliness towards crypto. Let's start with the stable coin story, Emily, uh why should we be watching what's going on with stable coins in Japan right now? Yes, I mean that's, that's kind of the key question because it can sound on the surface like this is a niche story. It's actually a really big story because as other jurisdictions all over the world are scrambling to figure out how to regulate stable coins including the United States, Japan actually has passed a law about stable coin regulation and this law already went into effect. And so now we're starting to see movement to actually establish the first stable coins in Japan. I think a lot of people don't realize that until very recently stable coins were essentially banned in Japan, they weren't allowed and now they are. So the latest news is basically about Mitsubishi UFJ Trust and Binance Japan, like basically putting together a joint study for the issuance of a new stable coin that would be, you know, pegged to fiat currencies including Yen and other foreign currencies. So this is just a very, you know, this is just a very interesting development because again, Japan passed a law about stable coins, but the stable coins aren't here yet. And now we're starting to see movement to that next step. So you mentioned that it's that Binance Japan is involved in this. Now, what's the government's attitude towards Binance Japan? You know, it seems like the rest of the world seems to be cracking down on Binance. But Japan, why, why is that, uh you know, are, are they getting away scot free if you will in Japan? Well, Binance Japan is the, is, is regulated within Japan's framework, which is actually very strict. So Binance Japan and Binance Global are not the same thing. You know, Japan, as you should have mentioned, has had various conflicts with Binance Global in the past. Um You know, just for, for example, for marketing to Japanese users, but Binance Japan again is within Japan's regulatory framework. So it's actually quite an interesting test. I mean, they have to follow like very strict rules like other Japanese exchanges. So it's not quite, it's not the quite, it, it's not the same, the same thing as Finance Global. It's interesting you bring that up Emily, I believe that FT X's Japan arm also didn't face the same fate as FTX in many other jurisdictions, would you say that the regulatory clarity and maybe even those stricter rules in Japan have achieved that consumer protection that, that the SEC likes to talk so much about here in the US. Yeah, great point. I mean, FDX, Japan. Exactly like was one of the few places where users were actually able to get their money back because of Japanese regulations, specifically segregation of assets. Right. So, right. I think that was sort of the point because before you know, you should have had F TX users, FX global Binance global users, I think Japan really wanted to sort of bring these exchanges within the domestic kind of like licensing framework, which again, you know, this is what's very interesting about Binance is I think there's questions about, you know, will, how will Binance Japan do because it's very different from Binance, which you know, there are just finance Japan does not have the same leeway in terms of things like leverage or just like more kind of sophisticated financial products. It has to operate in a much more constrained environment which could potentially put constraints on profitability. But again, you could argue that there are more regulatory protections for consumers. Now let's turn over to Hong Kong. We've spoken a lot on this show about the developments in Hong Kong. Hong Kong's opening up to web three, seemingly more friendly to web three organizations. And now we have this J PEX story what's going on here? Yes. So I think what's interesting is there's kind of what's happening and how the media is presenting it. So basically, yes, JPAC, you know Hong Kong regulators, Hong Kong is basically investigating alleged fraud. There's been a whole slew of arrests and we're seeing a lot of media headlines being like this is going to test Hong Kong's crypto friendliness because as we know Hong Kong relatively recently has reemerged as this quote unquote crypto friendly hub. It's getting a ton of press and now it's kind of of you know you're seeing one of these classic crypto stories, you know about fraud and misleading marketing and you know that kind of thing. So the question is, will this cause Hong Kong to about face? I don't necessarily think so. I think if you look at the way that Hong Kong regulators are responding, it's almost like they're saying I told you so because you know what JP was an unlicensed exchange and the big news out of Hong Kong is a licensing regime for exchanges. So Hong Kong has been emphasizing that they want crypto within a very regulated framework, within a license framework. And they want you know a lot of education for investors. So you know, if you look at the comments by Hong Kong authorities after this incident, they're basically saying that this incident highlights the risks of dealing with unregulated virtual asset trading platforms. And you know, obviously the subtext there is like we are trying to avoid such risks. How many unregulated uh uh exchanges do we know of that are operating? I mean, obviously it's tough because if they're, if, if we know of them, then we would think that the authorities will go after them. But do we have any estimates as to how big and the unregulated market is, is in Hong Kong for them to try and stamp out? It's really interesting that you ask that because that's actually exactly how the regulators responded. What they're doing now is they're sort of like making a very clear list of where it exchanges are in the licensing process. So, so they're going to be actually kind of like pub they're publishing that and making that extremely clear. Um Right now, I guess the short answer to your question is there are only two license exchanges in Hong Kong. So it's not, not, not very many, but you know, under sort of the new rules, it's like that is not something that can exist forever. I don't think you can continue operating in Hong Kong indefinitely without a license. That was one of the new rules established. Emily, it's always a pleasure seeing you shine a light on crypto in Asia. Thank you for unpacking those headlines for us.

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