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Buy Us Out: Majority of Chinese Blockchain Companies Don't Develop or Even Use Blockchain Technology

Blockchain companies have become a hot property in China over the years, and the rise in company registrations surged following Chinese Leader Xi Jinping announcement last October that the country must strive to become the global blockchain leader.

According to a report from China Finance, many larger businesses across China are blockchain companies in name only and in fact have little to do with the groundbreaking technology.

Chinese Blockchain Boom?

LongHash data reveals that of the 79,555 registered blockchain companies in China, only about 26,000 are operating and 57,000 have lost their license and legal status.

In the first quarter of 2020, as the Coronavirus disruption began to shut down factories, offices and cities in China, a further 2,383 brand-new blockchain companies emerged.

As the number of registrations soared following Xi Jinping’s announcement, Wu Zhen, Head of the Key Laboratory of Internet Financial Security Technology of the National Internet Emergency Center was interviewed about the growing statistics stating: “There are more than 32,000 blockchains […] However, we found that there are actually not many companies that have blockchain technology or chain ownership […] About 10%, or even less than 10%.”

It appears that many of the smaller Chinese registered “blockchain” companies and startups have been found to be shell corporations trying to capitalize on the buzz with the ultimate aim of many of these “blockchain” companies to be bought out or absorbed by a larger technology firm.

Xi Jinping Keeps Pushing Blockchain

During a recent inspection in Zhejiang, Chinese President Xi Jinping emphasized the necessity for the various decisions and arrangements of the government to plan for prevention and control of the Covid-19 outbreak and economic and social development work.

The coronavirus pandemic which was believed to have originated in Wuhan, in the Hubei province in December 2019. The spread of the virus has led to the lockdown of many cities, especially in the province of Hubei. Production has slowed down as many Chinese citizens have not been able to go to work.

The Chinese Leader also visited the city of Hangzhou to review demonstrations of digital governance and digital epidemic prevention. To be able to advance in the modernization of the national governance system and governance capacity, the Chinese Leader emphasized the requirement for deploying blockchain, artificial intelligence, cloud computing, and other disruptive technologies to promote innovation and smart cities.

He pointed out the importance of the implementation for epidemic prevention and control as well as the resumption of production work to strive for the year’s economic and social development goals.

Image via Shutterstock

Standard Chartered’s Zodia Custody Gets FCA Approval to Offer Cryptocurrency Services

Zodia Custody has announced that it has obtained approval from the UK regulator (Financial Conduct Authority – FCA).

SC Ventures, the innovation and ventures unit of Standard Chartered and Northern Trust Corporation, launched Zodia Custody in 2020 in response to the rising number of institutions making their entry into the digital asset market.

Based on the development regarding the FCA’s approval, Alex Manson of SC Venters stated: “We believe crypto assets as an asset class is here to stay. We set up Zodia Custody with the clear goal of serving institutional investors who want to invest in cryptoassets in a sustainable, safe and responsible way. Our aspiration is to lift standards, grow the ecosystem and help a nascent industry mature, becoming more acceptable to institutional investors and ultimately society at large.”

Zodia Custody has obtained approval from the FCA under UK money laundering regulations. It will now apply standards equivalent to those already used for the custody of traditional securities in running its cryptocurrency business.

With its aim to serve the institutional market, Zodia Custody will offer custody services for the most-traded cryptocurrencies, including Bitcoin, Ethereum, followed by XRP, Litecoin, and Bitcoin Cash, which represent 80% of the total assets traded on the largest crypto exchanges at approximately $395 billion. Zodia is therefore well set to offer services to cryptocurrency businesses.

Crackdown on Cryptocurrency

Zodia’s entry into the digital asset market is likely to be a game-changer for the institutional adoption of crypto assets.

However, it has not been easy to get an FCA registration. So far, only nine firms have obtained a cryptocurrency registration. The main requirement is the enforcement of anti-money laundering and the prevention of terrorism financing. In January 2020, the FCA enabled a temporary registration, with about 75 firms currently holding such a designation, including the likes of Revolut, which processes significant volumes.

The first authorisation by FCA went to Archax, the tokenised securities firm, in August 2020. The only registration approval awarded to crypto businesses in 2020 included Ziglu crypto investment firm and crypto trading firm Gemini Europe. Since September 2020, there was no registration approval until this year in June when custody firm DigiVault, Ramp Swaps, Fibermode, and Solidi got approval.

In June this year, over 60 crypto-related firms, including Binance, withdrew their applications with the Financial Conduct Authority to do business in the UK. The nation tightened its regulation in space.

In late June, the regulator banned Binance from conducting its regulated activities in the country due to a lack of proper money laundering and terrorism financing prevention capabilities. The FCA joined other regulators across the globe, moving to prohibit or heavily control the crypto exchange amid a series of global regulations aiming to tighten regulations around crypto use. The ban also reflects concerns that Binance exchange is being used by criminals to launder the proceeds of attacks.

Crypto.Com Wins Registration Approval in France

Crypto.com, a digital asset trading platform headquartered in Singapore, has secured regulatory approval from France’s top financial regulators as a Virtual Asset Service Provider (VASP).

The latest move would allow Crypto.com to offer virtual currency and wallet services to retail and institutional investors in France.

The approvals came after the Autorité des Marchés Financiers (AMF) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) evaluated the company’s procedures for AML and countering the financing of terrorism and were satisfied as okay. “Crypto.com was subject to rigorous review, particularly around anti-money laundering and combating the financing of terrorism, in order to receive regulatory approval,” the company stated on Wednesday.

Kris Marszalek, the CEO of Crypto.com, further commented: “The European market is critical to Crypto.com’s long-term growth and success, and we are extremely proud to have received AMF approval in France.”

The regulatory nod would help boost the company’s ambitions in Europe and mark its major approval from a G7 member nation. In July, Crypto.com obtained regulatory approval to operate in Italy. Last month, the UK’s Financial Conduct Authority added the company to its cryptoasset register. In late July, the firm secured registration in Greece from the Hellenic Capital Market Commission.

Emerging as preferred location for crypto

In June 2021, France enacted new cryptocurrency regulations that impact not only French firms but also international crypto companies seeking to operate in France. The new rules marked a huge shift in crypto rules since France started regulating the industry in 2019. As a result, crypto firms are now subject to mandatory registration, and KYC requirements have become stricter than before.

While France is becoming a go-to location for crypto companies in the European Union bloc, these firms are expected to get a license and customer safeguards in order to issue and sell digital tokens in the country. Registration is mandatory for all firms looking to offer digital asset custody and trading services in the country.

In May, Binance secured Digital Asset Service Provider (DASP) registration by the Autorité des marchés financiers (AMF) – a new license that enables the crypto platform to offer regulated services in France.

In early last month, French regulators granted Luno, a London-based crypto exchange, registration for a digital asset service provider license (DASP). The DASP registration now allows Luno to offer its digital asset trading services directly to its French customer base.

Revolut Finally Wins FCA Registration to Offer Crypto trading Services in UK

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Revolut, a London-based digital banking startup, has finally won a long awaiting registration from the U.K.’s Financial Conduct Authority (FCA) to offer crypto services in the United Kingdom.

Revolut becomes the latest accredited crypto asset firm register, bringing the list of companies approved to conduct crypto asset activities in the country to 38.

An FCA spokesperson discussed the development: “We confirm that Revolut has been removed from the temporary register and has received full registration as a crypto asset firm. Revolut has agreed to a number of directions designed to ensure it has the systems and controls to meet the requirements of the money laundering regulations.”

The FCA became the U.K.’s anti-money laundering and counter-terrorism financing authority at the beginning of 2020. As a result, the regulator requested firms conducting certain crypto asset activities nationwide to register with it. And so, more than 100 firms, including Revolut, applied for registration.

Although the registration deadline was in March this year, the FCA allowed a select number of firms to remain on the watchdog’s Temporary Registration Regime (TRR), which was introduced to enable firms to continue operating while their applications were being reviewed.

As of early April, Revolut was one of five firms on the Temporary Registration Regime, along with CEX.I0, Copper Technologies, GlobalBlock and Moneybrain. This implied that more than 60 other applications were denied registration or had withdrawn from the official register.

Efforts to Ramp Up Growth Across the World

This week, Revolut has finally received its approval, while the fate of the other four firms is still unknown. The latest move follows a series of additional regulatory achievements for Revolut around the globe as part of its efforts to launch its services to more customers.

On August 15, Revolut was granted authorization by the Cyprus Securities and Exchange Commission (CYSEC), allowing it to offer crypto services across the European Economic Area (EEA). The EEA includes the 27 nations in the European Union, including Iceland, Liechtenstein and Norway. Therefore, the U.K.’s registration license cemented the winning regulatory approval for the company’s crypto services in Europe.

Early last month, Revolut gained regulatory approval to operate in Singapore. On August 4, the firm launched its crypto services in Singapore.

With the U.K.’s FCA approval, Revolut is now fully authorized to provide crypto services in the United Kingdom. The authorization also has strengthened hopes for the firm to get a U.K. banking license that would enable it to offer its own banking products in its home country.

Revolut, which applied for a U.K. banking license in January 2021, sees getting a U.K. banking license as being a key step in its plan to become a global super app. The firm applied for 48 banking licenses across the globe, but so far, it has received 44 – still awaiting to receive some elsewhere, including in the U.K.

Revolut’s U.K. banking license may be delayed after the Financial Reporting Council (FRC) discovered flaws in its audit by U.K.’s auditing firm BDO.

Mt. Gox Creditors Given Extra Month to Register Claims, Distribution Deadline Delayed

Mt. Gox was a cryptocurrency exchange that was situated in Tokyo. At one point in time, it was responsible for more than 70% of all Bitcoin transactions. In 2014, the exchange suffered a hacking attack, which led to the theft of thousands of Bitcoin and the subsequent filing of a bankruptcy claim by the exchange. Since then, creditors have been holding out hope that they would eventually be compensated for the damages they sustained.

The official document cites a number of reasons for the postponement in the registration and distribution deadlines, one of which is the progress that rehabilitation creditors have achieved in regard to the selection and registration. Creditors have the choice of obtaining payment in the form of a lump amount, having their funds sent by a bank or another provider of money transfer services, or transacting with a cryptocurrency exchange or custodian.

Since the exchange went bankrupt, the delay in the payment has been a source of concern, especially in light of the large rise in value of Bitcoin that has occurred since the collapse of the exchange. There has been conjecture over the effect that creditors of Mt. Gox selling their assets may have on the market if they made that decision. Yet, according to a story that was published by Bloomberg not too long ago, the major creditors of Mt. Gox have no intentions to liquidate any of their Bitcoin holdings.

Creditors of Mt. Gox have been given some breathing room thanks to the extension of the registration and distribution deadlines. This gives the creditors more time to submit claims and decide how they would want to be compensated for their losses. As the cryptocurrency industry continues to mature, it is absolutely essential that exchanges place a high priority on security measures in order to forestall the occurrence of incidents similar to those that have already occurred in the past. This will ensure the safety of creditors as well as investors.