Another week, another crypto Asia update. In this week’s update, the focus has shifted towards maintaining regulatory clarity and reinforcing digital asset infrastructure rather than sweeping changes. Governments are fine-tuning what’s already in place. Here’s the rundown of the biggest headlines from this week in crypto Asia. India Formally Reviews Its VDA Framework India currently has more than 100 million crypto users in the country, but lacks a proper framework to govern the sector. For now, the sys ...

Core Viewpoint - The SEC's potential plan to allow crypto companies to sell "tokenised" stocks may pose risks to investors, according to a letter from a group of stock exchanges [1][3]. Group 1: SEC's Regulatory Approach - Several crypto companies intend to offer crypto tokens linked to listed equities, allowing retail investors to gain stock exposure without direct ownership [2]. - The SEC is considering an "innovation exemption" from securities laws to enable crypto firms to explore new business models [3]. - The WFE expressed concerns that such exemptions could jeopardize market integrity and investor protections [3][4]. Group 2: Industry Reactions - The WFE, which includes major exchanges like Nasdaq and Deutsche Boerse, has previously voiced alarm over platforms offering tokenised stocks [5]. - The letter from the WFE indicates a pushback from traditional finance against certain crypto initiatives, particularly as they begin to compete with established financial services [6]. - The WFE advocates for a level playing field, suggesting that both crypto platforms and traditional finance should adhere to the same regulatory standards [6][7].

The UK Financial Conduct Authority is getting serious on stablecoins. On Wednesday, the financial watchdog launched a special cohort within its Regulatory Sandbox for firms issuing blockchain-based tokens pegged to currencies like the British pound and US dollar. “It’s a unique chance for innovative firms to test their stablecoin products and services under the UK’s evolving regulatory regime,” David Geale, the FCA’s executive director for payments and digital finance, said in a speech shared with DL New ...

Core Insights - Polymarket has received approval from the CFTC to operate as a regulated exchange in the U.S. [1][2][4] - The approval allows Polymarket to onboard U.S. brokerages and customers directly, facilitating trading on U.S. venues [3][7] - The platform has made significant progress in the prediction market, raising $2 billion at a $9 billion valuation [6] Regulatory Developments - The CFTC issued an amended order of designation, enabling Polymarket to operate an intermediated trading platform [2][7] - As part of the approval, Polymarket has developed enhanced surveillance systems and market supervision policies [5] Operational Enhancements - Polymarket plans to implement additional rules and processes for intermediated trading before its official U.S. return [5] - The platform aims to leverage traditional market infrastructure, custody, and reporting channels for trading [3]

Core Insights - The cryptocurrency market is experiencing a rebound after a recent sell-off, with Bitcoin surpassing $87,000 and Ether rising to $2,863, indicating a positive trend for digital currencies [2][3] - Research indicates that stable coins now constitute 9% of the total crypto market cap, marking a two-year high, as investors seek protection from market volatility [3][4] Market Trends - There is a notable shift towards stable coins among crypto investors, driven by factors such as clearer regulations, increased institutional interest, and their growing use in cross-border payments and DeFi [3][4] - The stable coin market share has been rising over the past five months, reflecting a more cautious approach among investors in the crypto space [4] Regulatory Developments - The signing of the Genius Act stable coin bill into law in the US represents a significant regulatory advancement, enhancing investor confidence and attracting more capital into the sector [4] - NASDAQ is actively pursuing the introduction of tokenized securities, having filed an application with the SEC, which could allow for the trading of tokenized stocks on a major US exchange [8][9] NASDAQ's Initiatives - NASDAQ aims to bridge the digital asset world with traditional finance by allowing investors to choose between tokenized and traditional asset representations [11][12] - The exchange emphasizes maintaining investor rights and protections while integrating tokenized assets into existing market structures [15][19] Benefits of Tokenization - Tokenization is expected to improve efficiency, enhance audit trails, and potentially allow for 24/7 trading, with immediate benefits in post-trade processing and settlement [21][22] - The ability to use tokenized assets for collateral mobility is anticipated to enhance capital efficiency in the market [24][25] Product Offerings - NASDAQ has introduced various crypto-related products, including spot Bitcoin and Ether ETFs, and is open to listing additional ETPs as long as they meet established criteria [27][28]

Core Insights - The IRS is proposing new rules requiring U.S. taxpayers to report and pay taxes on foreign crypto accounts, modeled after existing frameworks for offshore bank accounts [2][3] - The proposal aims to increase visibility and compliance for U.S. taxpayers holding crypto with foreign entities, which could include various offshore exchanges and custodians [2][5] - The impact of this change will primarily affect a specific group of crypto taxpayers who have not been fully compliant with existing tax regulations [6] Regulatory Changes - The new IRS proposal is part of a broader effort by the Treasury to impose reporting obligations on "digital asset accounts" held abroad, with a deliberately broad definition of foreign accounts [2] - The implementation of the proposed rules is expected to discourage U.S. taxpayers from moving their digital assets to offshore exchanges, promoting the growth of digital assets within the U.S. [3] Taxpayer Cohorts - There are four identified cohorts of crypto taxpayers in the U.S., with the new rules primarily impacting those who have been skirting tax obligations [6] - The cohorts include those who report all transactions, those who only report gains when cashing out, those who do not report at all, and those without taxable gains [7]

The explosive rise of stablecoins has triggered pressure from U.S. banks and regulators on the Basel Committee to reconsider its stringent capital requirements for crypto assets. Despite being marketed as lower-risk digital currencies, stablecoins remain subject to the same harsh regulatory treatment as volatile cryptocurrencies under current Basel rules. Erik Thedéen, chair of the Basel Committee on Banking Supervision, acknowledged in a Financial Times interview that the global framework needs recalibr ...

Core Insights - Bitcoin has seen a recent gain of 2.2%, while Ethereum has increased by 4.1%, amidst ongoing pressure in the crypto market [1] - The current market situation is different from past crashes, which were typically triggered by significant events like exchange collapses or bankruptcies [2] - The crypto asset appears to be maturing and is now more correlated with other asset classes, contrary to its original premise of being independent [3] - Despite the lack of significant changes in the regulatory environment since Trump's election, Bitcoin has erased all its previous gains, indicating a complex market response to regulatory rhetoric [4] - Following a flash crash on October 10th, the crypto market has struggled to recover, entering a potential bear territory or another crypto winter [5][6] - The approval of crypto ETFs initially led to massive inflows from retail investors, but there is now a trend of withdrawals, suggesting increased sensitivity to price volatility among investors [6]

Core Viewpoint - Kraken's co-CEO Arjun Sethi criticizes the U.K. crypto regulations as overly restrictive, claiming they hinder the industry's growth and innovation compared to the U.S. [1][7] Regulatory Impact - The Financial Conduct Authority (FCA) introduced new promotion rules in late 2023, requiring crypto firms to display prominent risk warnings and conduct "appropriateness assessments" for customers before purchasing digital assets [3][5] - Sethi argues that these regulations create unnecessary friction for investors, comparing the mandatory warnings to "cigarette box" labels, which he believes deter ordinary investors from accessing opportunities [2][4] Market Access - Due to the U.K. regulations, Kraken's British users reportedly cannot access approximately 75% of the products available to U.S. customers, significantly limiting their investment options [5][8] - The restrictions contrast sharply with Kraken's expansion efforts in other markets, such as its recent $100 million acquisition of Small Exchange, a U.S. futures trading platform [5][6] Industry Comparison - Industry leaders, including Sethi, express concern that the U.K. is falling behind the U.S. in crypto innovation, especially as the U.S. loosens its regulatory stance [9]

Core Viewpoint - The Bank of England has proposed temporary limits on stablecoin holdings for retail and business users, aiming to manage financial stability during the initial adoption phase of systemic stablecoins [1][2][3]. Group 1: Proposed Limits - Individuals would be allowed to hold up to £20,000 (US$26,000) in a single systemic stablecoin, while businesses would face a £10 million (US$13.1 million) cap [1]. - The proposal does not cover stablecoins used for non-systemic purposes, which remain the predominant use case today [2]. Group 2: Future Adjustments - The limits are transitional and will be loosened or removed once financial stability risks subside [3]. - Non-systemic tokens will be regulated separately by the Financial Conduct Authority [3]. Group 3: Reserve Management - Up to 60% of reserves could be held in short-term UK government debt, with the remainder as unremunerated deposits at the central bank [4]. - The proposal allows for a greater share in interest-bearing instruments, which could impact trust and liquidity during stress periods [4]. Group 4: Liquidity and Market Considerations - The Bank is considering providing recognized issuers access to its liquidity facilities to meet redemption requests [5]. - The current size and structure of the UK's short-term debt market may not support large-scale stablecoin demand [5]. Group 5: Regulatory Approach - The proposal represents a softening from the Bank's earlier stance, which recommended that all reserves be held as central bank deposits only [6]. - Requiring systemic issuers to hold some reserves in central bank deposits could enhance confidence and systemic resilience [7].