The second half of October has been quite eventful! Hong Kong’s securities regulator, the SFC, is considering allowing retail investors to invest in crypto assets, relaxing their previously stringent policy of limiting participation only to those deemed professional investors. Whether there are wider implications for Hong Kong’s crypto industry, or the crypto world more broadly is yet to be seen. Still, it is worth noting that a traditional, conservative, institution like the SFC has had a change of heart.  

In other news, Yuga Labs—the creators behind Bored Ape—are reportedly under investigation by the SEC over whether their NFTs could be considered securities.   

Further, Mastercard has partnered with Paxos to offer crypto services to their customers, and Brazil’s Buffet-backed Nubank plans to launch its own crypto token on the Polygon blockchain. 

Finally, a host of crypto exchanges are closing the accounts of Russia-based customers in the wake of recent sanctions imposed by the European Union in response to the ongoing war in Ukraine. 

Hong Kong could legalise retail crypto investing 

The Hong Kong Securities and Futures Commission (SFC) has confirmed that allowing retail investors to invest in crypto assets is under consideration.   

Elizabeth Wong, the head of the fintech unit of the Hong Kong SFC, discussed the regulation of cryptocurrencies during a panel discussion, as reported by the South China Morning Post. As Hong Kong is a special administrative region, there are exceptions to what is regulated and how. There is also a degree of autonomy in how Hong Kong conducts its financial affairs, differing from mainland China.  

Wong emphasised this difference, confirming that while the regulator has limited crypto trading to professional investors, it is considering relaxing those restrictions. The thawing, may in part, be due to the Hong Kong government seeking to salvage losses caused by various companies leaving the city in response to overly strict regulatory measures. It is also, as Wong said, a response by the SFC to what they deem greater controls and compliance on the part of the crypto industry. 

Up until now, individuals wishing to trade crypto in Hong Kong on centralised exchanges had to be classified as a ‘professional investor’; with at least US$1 million in liquid assets.  

Bored Ape creator Yuga Labs reportedly under SEC investigation 

According to Bloomberg, an anonymous source has claimed the SEC is investigating whether NFTs sold by Yuga Labs violated security registration laws. 

The SEC is reportedly assessing whether the NFTs sold by Yuga Labs should be regulated as securities, and therefore be treated as securities when it comes to disclosure laws. 

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Yuga Labs Inc. is the company responsible for the Bored Ape Yacht Club and Mutant Ape Yacht Club NFTs. Its utility token Ape Coin (APE), and NFTs are reportedly under examination by the SEC, as is the governance of Yuga Labs. 

Once again, the question has arisen as to whether NFTs should be regulated as securities, as financial oversight bodies continue to negotiate the world of cryptocurrency, attempting to determine how crypto assets should be defined as compared to traditional assets – or if that comparison is possible at all. The SEC was investigating the NFT market earlier this year, so this latest development is hardly surprising, given the success and prominence of Yuga Labs. 

Yuga Labs has claimed it is cooperating with the investigation. While the SEC has declined to address the issue publicly. 

Mastercard Partners with Paxos to help banks offer crypto services 

Mastercard and Paxos are reportedly in collaboration on a project called ‘Crypto Source’, allowing banks to offer crypto trading services. 

On Monday the 17th of October, Mastercard announced it has extended its partnership with Paxos, a cryptocurrency trading platform best known for its gold-backed cryptocurrency PAX Gold (PAXG). 

The project that they are collaborating on is called Crypto Source which aims to enable banks and other financial bodies to better offer crypto trading services. Crypto Source will see Mastercard be able to connect Paxos to other banks and provide trading and holding services on their behalf. 

According to Mastercard, the motive behind this move is to create a bridge between crypto and banks and, in doing so, increase the adoption of crypto trading services and investor confidence in crypto markets. In concert with Paxos, the role of Mastercard will be to ensure compliance of transactions, further helping banks to onboard new technology into existing systems. 

Paxos has worked on a host of crypto projects alongside numerous companies, such as PayPal. Their partnership with Mastercard adds to the growing collaboration between the crypto industry and traditional companies.  

Multiple crypto exchanges close Russian accounts following EU sanctions 

Several prominent crypto exchanges have given notice to Russian customers to withdraw their assets, in the wake of a raft of new sanctions enacted by the European Union. 

On the 6th of October, the European Union enacted a new series of sanctions against Russia, following Putin’s escalation of the conflict in Ukraine, involving his mobilisation of Russian citizens in an attempt to quell mounting strategic losses. In accordance with these sanctions, several large cryptocurrency exchanges, including Bitcoin.com, Binance, Coinbase, and Kraken, have elected to cease serving Russia-based customers. 

Previously, sanctions had limited crypto transfers between EU nations and Russia to €10,000, while the newer sanctions have the effect of functionally banning any and all crypto asset wallet services to any Russian resident. 

Bitcoin.com has given customers based in Russia until 27 October to remove their assets, while LocalBitcoins barred them from access on 7 October, just a day after the sanctions were announced. A whole host of exchanges are expected to quickly follow suit, although it can’t be certain as to whether or which exchanges may ignore the sanctions. Bitfinex has expressed concern about cutting Russian services and will likely continue to do so unless presented with orders by regulatory agencies. 

Buffet-backed neobank to launch crypto token on Polygon 

Nubank, a neobank backed by crypto critic Warren Buffet, has announced its partnership with Polygon and plans to launch its own digital token Nucoin to engage the platform’s reward system. 

Nubank is Brazil’s largest digital bank and has the backing of Warren Buffet, the indomitably successful magnate, investor, and CEO of Berkshire Hathaway. Nubank has announced plans to launch its own cryptocurrency early next year, which will be called Nucoin and operate on the Polygon blockchain. The digital bank will use Nucoin to power its customer loyalty and rewards program for customers. 

Nubank has previously engaged with Web3, offering its customers crypto trading services in collaboration with Paxos. Prior to launching its coin, it plans to allow selected customers to test the token.  

It is an interesting – if not unexpected – move from Nubank, a neobank known for its bets on emerging markets and new technologies. What it does demonstrate though, is that creative players are increasingly looking to utilise crypto and its underlying technology to fill real world needs.    

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