Asia Express – Cointelegraph Magazine

Hong Kong digital currency trial completed with Visa, HSBC and Hang Seng

Hong Kong is one step closer to a central bank digital currency (CBDC) by announcing successful Phase 1 results in collaboration with Visa, HSBC and Hang Seng Bank.

In a November 1 announcement, Visa said it had achieved “near real-time” finality through transfers involving tokenized deposits of digital Hong Kong dollars (e-HKD).

“Tokenized deposits were burned from the sending bank’s ledger, minted from the receiving bank’s ledger, and simultaneously made interbank settlements through a simulated wholesale CBDC layer,” the payments company wrote.

“This will improve liquidity management by providing settlements in an atomic manner, simplifying the operational dependencies imposed by financial institutions and other intermediaries more efficiently.”

The payments processor also said its digital Hong Kong dollar test pilot operates 24/7 and surpasses the uptime of traditional financial systems, which typically do not operate after hours or on weekends. Additionally, the company wrote, “Tokenized deposits can be traded entirely encrypted without revealing information about your identity, balance, or transaction amount to non-bank users.”

As a next step, Visa plans to explore ways to automate real estate transactions using e-HKD in tokenized asset markets and programmable finance. “In this pilot’s real estate payment use case, payment where the buyer transfers remaining balance tokens to the real estate developer can be automated once the contract completion date is reached, minimizing latency at the end of the process,” the company said. Other research interests include the expansion of retail solutions and digital cross-border payments.

Despite the promising results, no clear timeline has been given for the full launch of the Hong Kong digital dollar, nor has it been confirmed that such a launch will even occur. The Hong Kong Monetary Authority warned in an October 30 report that there were still issues to be resolved.

“For example, rCBDCs issued as programmable currencies may be more vulnerable to cybersecurity risks because they may provide more vehicles for external threats to inject malicious code.”

With the connivance of the central government in Beijing, Hong Kong has been working to become a Web3 hub for blockchain in the Asia-Pacific region. However, these efforts were overshadowed by the collapse of the JPEX cryptocurrency exchange, which left Hong Kong investors with losses exceeding $150 million. After the incident occurred, local residents’ trust in cryptocurrency fell sharply.

Hashkey’s regulated exchange token

Hashkey, one of the first cryptocurrency exchanges to receive a regulatory license in Hong Kong, plans to launch its exchange token in 2024.

According to a recent white paper, “HashKey EcoPoints” (HSK) tokens will be issued on Ethereum with a total supply of 1 billion. Of this amount, 65% is reserved for users, 30% for Hashkey employees, and 5% for the ecosystem coffers.

Tokens will be distributed as an incentive to ecosystem users and distributors and will not be “sold through private or public sales for fundraising purposes.” As for utility, the company stated that tokens can be used to settle transaction fees, early access to future token subscriptions, and product upgrades on exchange services.

Additionally, the exchange has committed to repurchase up to 20% of revenue generated from related Hashkey services into HSK tokens. “HashKey implements an offset issuance mechanism (burn) to protect HSK holders from the dilutive impact of increased reward-based HSK circulating supply,” the company wrote. However, the token design plan still requires regulatory approval.

“The contents of this white paper have not been reviewed by any regulatory body in Singapore or Hong Kong. We recommend that you exercise caution in relation to the information in this white paper and any transaction you wish to conduct in relation to HSK.”

In August, Hashkey received one of the first regulatory licenses for retail cryptocurrency trading in Hong Kong, along with cryptocurrency exchange OSL. Trading volume was initially stagnant, but has since been gaining momentum. Only select coins and tokens, including Bitcoin, Ethereum, Tether, and Avalanche, have been approved for listing on exchanges.

$308 Million Syndicate Manipulated Cryptocurrency Markets to Launder Money: Police

Nineteen Chinese nationals have been sentenced for their roles in a $308 million money laundering scheme involving cryptocurrency between November 2020 and April 2021.

According to an October 31 report from the Chongqing Tongliang District People’s Court, Mr. Zhang and Mr. Deng, the main leaders of the money laundering organization, laundered a total of $308 million worth of Bitcoin and Tether for the proceeds of crimes related to: Online gambling and money transfer fraud.

Police said the defendants orchestrated an elaborate scheme using peer-to-peer transactions to avoid platform monitoring and learn about customer needs. Here, the coins were sold against the stablecoin Tether at an “abnormal price relative to the spot market” and then transferred elsewhere. Exchange for cash.

“Using pretexts such as withdrawing project funds and wages for migrant workers, a gang was organized and cash was withdrawn from bank counters in provinces and cities such as Chongqing, Sichuan, and Shanghai. The cash withdrawal amount varied from hundreds of thousands of yuan to millions of yuan each time. “After withdrawing cash, the cash is packaged in trolley cases, backpacks, etc. and transported by plane,” he said.

Nineteen people, including Mr. Zhang and Mr. Deng, were sentenced to prison terms of six months to six years. The judge said, “Recently, illegal criminal activities through communication networks have become rampant, posing a great threat to the legitimate rights and interests of the general public.”

Due to the rise in cryptocurrency-related money transfer fraud, China’s central government has been cracking down heavily on cryptocurrency-related activity in the country, although there have been some recent signs of easing. Nonetheless, these enforcement actions have sometimes resulted in collateral damage to foreign investors using China-based cryptocurrency services without criminal intent.

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Jyuyuan Line

Zhiyuan Sun is a journalist at Cointelegraph specializing in technology news. He has years of experience writing for major financial outlets such as The Motley Fool, Nasdaq.com, and Seeking Alpha.