Hong Kong’s Securities and Futures Commission has imposed a minimum insurance requirement of 50 per cent on assets held by licensed crypto exchanges as a customer safeguard measure. This measure has been designed to enhance user protection, and firms must not only meet this insurance threshold, but also undergo rigorous audits to ensure compliance.
Notably, OSL Exchange, a key crypto exchange in Hong Kong, recently disclosed its two-year partnership with Canopius, a Lloyds of London underwriter syndicate, securing an insurance policy covering an impressive 95 per cent of its users’ assets.
Likewise, HashKey Exchange, another licensed virtual asset trading platform in Hong Kong, has also inked a crypto insurance agreement with OneInfinity, signalling a proactive approach toward safeguarding users’ assets. This agreement, established in November 2023, encompasses potential coverage expansion into incidents related to server downtime, data backup, and load management.
According to reports, this insurance coverage extends protection for users’ assets ranging from $50 million to $400 million.
Fidelity’s spot Bitcoin exchange-traded fund (ETF) reportedly attracted a noteworthy $208 million in daily inflows on January 29, 2024, surpassing the outflows from Grayscale Bitcoin Trust (GBTC) for the first time since its launch.
According to provisional data from Farside Investors, Fidelity’s FBTC recorded substantial inflows, while GBTC experienced daily outflows of $192 million, marking a nearly 25 per cent drop from January 26, 2024 and a significant 70 per cent decrease from its peak daily outflows on January 22, 2024. The slowed outflows from GBTC have drawn attention from crypto traders, who are monitoring for signs of a potential shift in investor sentiment.
In contrast, the January 29, 2024 figures reveal that nine new US spot Bitcoin ETFs collectively reached a volume of $994.1 million, almost doubling that of GBTC, which had a volume of $570 million. Notably, BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s FBTC accounted for the largest volume share after GBTC, with daily volumes of $460.9 million and $315.4 million, respectively.
The competitive market for spot Bitcoin ETFs has prompted some issuers, including Invesco and Galaxy Asset Management to reduce fees on their joint ETF, the Invesco Galaxy Bitcoin ETF (BTCO), with an eventual expense ratio dropping from 0.39 per cent to 0.25 per cent. This fee reduction aligns BTCO with other major players like BlackRock, Fidelity, Valkyrie, and VanEck, with the added incentive of zero fees for the first six months or until it reaches $5 billion in assets.
Polygon Labs’ legal team is proposing a regulatory framework that designates decentralised finance (DeFi) protocols as “critical infrastructure” for the national and economic security of the US. Published on January 29, 2024, the framework, authored by Rebecca Rettig, Katja Gilman from Polygon Labs, and Michael Mosier of Arktouros, recommends placing truly decentralised DeFi protocols under the oversight of the US Treasury’s Office of Cybersecurity and Critical Infrastructure Protection (OCCIP).
While the OCCIP is not a traditional financial regulator, it plays a crucial role in enhancing the security and resilience of critical infrastructure in the financial services sector.
The proposed framework underscores the diversity within the DeFi space, acknowledging that not all protocols are fully decentralised. Protocols with notable centralisation points would still be subject to existing financial regulations. Additionally, the framework introduces the concept of “critical communications transmitters”, entities integral to genuine DeFi systems. These entities would have specific obligations aimed at safeguarding US national and economic security, thus striking a balance between regulatory oversight and fostering innovation.
