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You can't sail Today's boat on Yesterdays wind - Michael Noel

Southeast Asian Countries are Increasingly Adopting Digital Payments, but Regulatory Issues May Slow Adoption, Fintech Exec Argues

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Fady Abdel-Nour, Head of Global M&A and Investments at PayU, a Fintech firm that provides payment technology to online merchants, has noted that regulators in Southeast Asia are working hard to ensure that digital payments are adopted by consumers.

Abdel-Nour has pointed out that UPI, digital wallets, and various mobile-based payment apps are now being supported by progressive regulations which have led to their successful adoption in many Asian countries.

He claims that there are still several Southeast Asian nations that need to be doing a lot more, in order to help consumers with conducting digital transactions. For instance, Indonesian Fintech companies have revealed that they’re now waiting for a really long time before their applications for banking licenses are reviewed by regulators.

Abdel-Nour argues in a blog post published by Fintech Magazine that these types of issues can slow down the adoption of digital platforms and services, which have become essential following the COVID-19 outbreak. Abdel-Nour recommends that regulators should ensure that they are taking measures and introducing policies that offer consumer protection (like appropriate KYC and AML guidelines).

In addition to regulatory challenges that may be slowing down the adoption of digital services, the Southeast Asia region has been hit hard (especially small businesses) due to the pandemic.

As reported in late September 2020, Indonesian regulators and Fintech firms are now focused on balancing regulations with responsible innovation.

While the payments sector of Fintech has managed to grow steadily, with more consumers conducting digital transactions, peer to peer Fintech lenders in Asia are struggling right now. As reported recently, the Indonesian Fintech Lenders Association has set up a task force to help P2P lending firms deal with the rising number of bad loans.

Other challenges faced by the Fintech sector in Asia include a general shortage of qualified finance industry professionals. As covered, the Southeast Asian country of Vietnam needs more qualified workers and better overall policies to expand its Fintech sector.

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Traders Withdraw Over 40K Bitcoin from BitMEX as Company’s Legal Woes Kick-Off

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Top cryptocurrency derivatives exchange platform BitMEX is currently battling a hoard of criminal charges from the United States government. While the Seychelles-based exchange has denied any wrongdoing, the scandals appear to be causing it to bleed customers.

Antsy Traders On the Move

According to data from Glassnode, traders have withdrawn about 45,000 BTC tokens (worth about $420 million) from the exchange since its row with the U.S. government began. The blockchain data tracking firm had previously pointed out that BitMEX lost 23,200 BTC (about $243 million) in a single hour, marking the most massive hourly outflow that the exchange has ever recorded. 

As Glassnode added, BitMEX wallets initially held about 170,00 BBTC (worth about $1.8 billion). This significant outflow of assets will undoubtedly hurt the firm.

Along with the outflows, open positions on Bitcoin futures contracts on the exchange have dropped by 20 percent, according to data from market analytics firm Skew. As the drop in assets, it is most likely that the government indictment case caused this hit to open positions.

Data from Crystal Blockchain corroborated the Glassnode report, explaining that net outflows from BitMEX continue to rise. The data analytics firm also posited that Huobi, Binance, OKEx, and Gemini had been the investor flight’s biggest beneficiaries. The four exchanges alone have reportedly taken in 20,000 BTC of the transferred assets.

Things Could Get Messy

The drops in metrics are coming from a significant BitMEX charge that dropped earlier this month. On October 1, the United States Commodity Futures Trading Commission (CFTC) filed a complaint against the Seychelles-based exchange, accusing it of operating an unregistered trading platform and violating Anti-Money Laundering (AML) violations. 

The filing, which was placed at the Southern District of New York, named five entities and three individuals who own the exchange. They include Arthur Hayes, BitMEX’s CEO, Samuel Reed, and Ben Delo. Other entities include and HDR Global Services (Bermuda) Limited (BitMEX), ABS Global Trading Limited, HRD Global Trading Limited, Shine Effort Inc., and 100x Holding Limited.

As the Commission explained, it believes that BitMEX had been illegally offering leveraged trading services to traders. Since its inception in 2014, the exchange reportedly offered leveraged trading to the tune of $1 trillion. It also charged BitMEX of violating basic compliant procedures, including failure to register with authorities and a lack of any AML and Know-Your-Customer (KYC) procedures.

The agency confirmed seeking disgorgement, civil monetary penalties, permanent trading bans, and injunctions against future violations. Besides the charges, the Court also indicted the three aforementioned individuals – as well as BitMEX’s Head of Business Development Gregory Dwyer – of violating the Bank Secrecy Act. If convicted, they could each face five years in prison and pay fines of about $250,000. 

FBI Assistant Director William Sweeney claimed that one of the company’s executives had bragged about the firm being incorporated in a jurisdiction outside of the U.S. because it would be easy to bribe their regulators. The Department of Justice confirmed in a statement that Reed was arrested on Thursday morning in Massachusetts. The other company executives are still at large.

Traders Withdraw Over 40K Bitcoin from BitMEX as Company’s Legal Woes Kick-Off

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CipherTrace Points Out Issues With Most Exchanges’ KYC Policies

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One of the many fronts from which cryptocurrency detractors have attacked the industry has been with fraud prevention.

While there are laws concerning identity verification and other measures in place, exchanges and other asset custodians haven’t done the best job of enforcing them. However, a new report is showing just how damaging the situation is.

No Progress Despite Regulations

Earlier this week, blockchain analytics firm CipherTrace published a study confirming that a vast majority of cryptocurrency exchanges worldwide lack a robust identity verification policy. The report, which summarized a survey of over 800 exchanges, found that 56 percent of them were still not up to the Know-Your-Customer (KYC) system requirements that regulators had implemented.

As the study found, 56 percent of all surveyed exchanges were significantly inadequate. Breaking things down, it found that the highest concentration of faltering exchanges is in Europe, with about 60 percent of Virtual Asset Service Providers on the continent having deficient KYC policies.

The United States, the United Kingdom, and Russia are the three countries with the highest number of such exchanges. Singapore also ranked high on the list.

In part, CipherTrace noted that many exchanges didn’t even mention their countries of incorporation anywhere on their websites. This exclusion implies that they could be hiding their jurisdictions to avoid compliance with the right KYC and Anti-Money Laundering (AML) policies. Of these exchanges, 85 percent have inadequate KYC frameworks.

CipherTrace also pointed out that Seychelles could be a potential hub for money laundering and other financial crimes, as the island nation has become a magnet for faltering exchanges. Per the report, 70 percent of exchanges registered there didn’t have robust KYC frameworks.

The study also looked into decentralized exchanges, finding that 81 percent of the 21 exchanges it surveyed had either weak KYC policies or none at all. Weak identity verification has always been a problem for crypto exchanges. Last year, when the Financial Action Task Force (FATF) published its Travel Rule, many pushed back at the AML enforcer for forcing exchanges to collect information. A similar reaction was witnessed following the implementation of the Fifth Anti-Money Laundering Directive (AMDLD5) from the European Union.

Binance’s Weak KYC Woes

Amid all of this pushback, money laundering in the crypto space has remained prominent in 2020. Some top exchanges have also found themselves in hot water.

Last month, the Japanese exchange Fisco sued Binance in the Northern California District Court, accusing the company of enabling hackers’ money laundering efforts due to its weak security policies. The suit originates from a security breach last year, where hackers stole 4.5 billion yen (about $40.09 million at the time) from its hot wallets and a further 2.2 billion yen ($19.61 million) in the company assets.

In its filing, Fiscco explained that its hackers had sent the stolen money to a Binance address. The exchange added that due to Binance’s weak KYC policies, they could cash out and launder their funds effortlessly.

Binance’s policy allows users to open accounts and make transactions less than 2 BTC. Fisco pointed this out, adding that the hackers could capitalize on it and other weaknesses.

CipherTrace Points Out Issues With Most Exchanges’ KYC Policies

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