FSTB (Financial Services & The Treasury Of Hong Kong) Secretary Christopher Hui first learned about crypto from friends who ran investment funds and invested in digital assets. Fast forward to today, he now focuses his attention on developing viable policies for the growing sector.

Hong Kong is currently testing an NFT offering, one of several pilots being run by the aforementioned regulator, including tokenizing green bonds and a CDBC known as the e-HKD.

In Hong Kong, crypto is currently regulated by several agencies. The Hong Kong Monetary Authority is investigating stablecoins, while the Securities and Futures Commission is in charge of enforcement. The FSTB establishes a more macro-level approach to regulation.

Going forward, the approach appears to be to incorporate crypto into financial regulation and hopefully provide an opening of areas for discussion, like enabling crypto investment under the incoming regulatory framework, which was previously ruled out.

The attempt by Hong Kong to re-establish itself as a crypto hub comes after a year of market turmoil that witnessed the Terra and FTX crashes, VC funds be liquidated, and jurisdictions such as Singapore tighten crypto regulation.

Mastercard has announced that it will be launching its Artist Accelerator initiative on the Polygon blockchain. The program is intended to teach musicians how to expand their brands by minting NFTs, creating an online presence, and establishing a vibrant community.

Although Mastercard has not disclosed who shall be participating in the accelerator, the company has nevertheless stated that it will conclude later this year with a live-streamed artist showcase.

According to Mastercard, the goal is to create an interactive space for music content production, cooperation, and ownership by connecting artists globally with mentors in Web3.

The accelerator will also include a limited edition NFT known as The Mastercard Music Pass, which will reportedly provide holders with access to unique music educational materials, resources, and other physical and virtual experiences.

Elsewhere, Morgan Stanley revealed that it now holds Bitcoin on behalf of customers, with $6.5 trillion in AUM (Assets Under Management). As a result, the investment bank has allocated 3% of its assets to BTC. The goal is to provide passive investors with a chance to gain exposure to crypto.

Cameron Winklevoss, President and Co-Founder of digital currency exchange Gemini, recently issued Barry Silbert with a one week ultimatum for the latter to provide approximately $1 billion. Cameron accused the CEO of crypto conglomerate Digital Currency Group (DCG) of undesirable tactics designed to damage his reputation, but insists he wants to resolve a complex lending dispute with the company that arose following the demise of FTX.

What happened?

Cameron Winklevoss released an open letter to Barry Silbert, the CEO of DCG, this past Monday, clarifying his side of an ongoing dispute with DCG and its subsidiary, Genesis Global Trading. Cameron set a short deadline for Silbert to publicly commit to fixing the situation which caused Gemini Earn to suspend withdrawals.

The Winklevoss twin accused Silbert of intentionally ignoring previous attempts to collaborate, insinuating that the DCG CEO hoped the issue would simply disappear if left alone. Moreover, Cameron claims that Silbert agreed to meet to discuss a proposal but did not show up. Winklevoss now demands that Silbert commit to reaching an agreement by January 8th, 2023.

What was in the letter?

Genesis Trading owes Gemini $900 million as a result of its previous partnership with Gemini Earn. The money, according to Cameron, belongs to the depositors associated with Gemini Earn. Cameron also claimed that DCG owes $1.675 billion to Genesis, its own subsidiary. He accused Silbert of knowingly diverting the funds to buy back shares, fund illiquid investments, and increase the NAV (Net Asset Value) of Grayscale funds rather than repaying third-party debt.

Silbert, for one, has denied that DCG borrowed the aforementioned sum specifically. He did not, however, deny that DCG owes Genesis money, and maintains that DCG has met all of its interest payment obligations.

Barry also claims that on December 29th, 2022, DCG delivered a proposal to Genesis but have yet to receive a response. Furthermore, some Grayscale funds have reportedly been trading at a significant discount to their NAV. The Grayscale Ethereum Trust (ETHE), its second biggest, recently traded at a 60% discount to NAV. Meanwhile, the Grayscale Bitcoin Trust (GBTC), traded at a 50% discount to its NAV.

What happens now?

Investors are concerned that the trust funds of Grayscale will be liquidated, potentially sending already vulnerable markets to even lower levels. Su Zhu, Co-Founder of 3AC, even took a shot at Gemini during the holiday season, accusing it of purposefully making it increasingly difficult for users to sue. In the bankruptcy case of 3AC, Genesis Trading has already filed a $1.2 billion claim.

As part of its efforts to resolve the dispute with Genesis, Gemini has formed a group of creditors. It hired Kirkland & Ellis as a law firm and Houlihan Lokey as an investment banker and financial advisor. Additionally, it is very possible that the threats in the letter will be insufficient on their own. Some Gemini Earn users, however, have decided to take matters into their own hands, as the lead plaintiffs have reportedly filed a class action lawsuit against DCG and Genesis, alleging that DCG tried to conceal insolvency details.

In the past, it was reported that DCG discreetly purchased the debt of 3AC to Genesis with a $1.1 billion promissory note due in 2033. Meanwhile, in a separate lawsuit, Gemini is accused of failing to register the interest-bearing accounts of Gemini Earn as securities. Interestingly enough, similar interest-bearing accounts offered by companies such as BlockFi and Voyager were deemed securities by US regulators.

LG Electronics, a South Korean technology conglomerate, has announced a new collaboration with cloud-based technology platform Oorbit and Pixelynx.

The goal is to construct a fully integrated music, gaming, and Web3 ecosystem and make the metaverse more easily accessible. The partnership will thus enable users to navigate interconnected digital worlds, concerts, and AI multiplayer games on their LG TVs, thereby simplifying interactions with the metaverse.

According to Pooya Koosha, Co-Founder and CTO of Oorbit, proprietary technology is the overarching framework which connects digital worlds and allows brands and developers to easily bring their experiences into the metaverse.

Therefore, Pooya added, the next step in making the metaverse accessible to all is to scale this technology for millions of LG TV customers.

Additionally, LG Electronics publicly modified its business development goals in March 2022 to include crypto and blockchain-oriented software. During its annual general meeting, LG also added two distinct crypto-related objectives, namely the development and sale of blockchain-based software as well as the sale and brokerage of crypto.

On December 29th, 2022, the Italian Senate approved its budget for 2023, which included a tax increase for crypto investors. This increase involves a 26% tax on capital gains regarding crypto-asset trading of more than 2,000 Euros.

Crypto assets are defined in the approved legislation as a digital representation of value or rights which may be transferred and subsequently stored electronically utilizing distributed ledger technology or anything similar. In the past, crypto assets in Italy were taxed as foreign currency, which meant lower taxes.

The bill also states that taxpayers will be able to declare the value of their digital-asset holdings as of January 1st and pay a 14% tax, a move designed to motivate Italians to declare their digital assets.

Elswhere, other budget law changes involve tax amnesties to lessen penalties for late tax payments, fiscal incentives for job creation, and a reduction in the retirement age. The changes additionally include tax breaks worth 21 billion Euros for households as well as businesses dealing with the ongoing energy crisis.

The new legislation comes shortly after the approval of the MiCA (Markets in Crypto Assets) bill on October 10th, which established a consistent crypto regulatory framework for 27 nations within the European Union. MiCA is scheduled to take effect in 2024.

Despite a turbulent year for the digital assets sector, the amount of crypto ATMs increased dramatically in 2022, according to new data.

The number of Bitcoin ATMs increased by a staggering 506% since January 2020, when there were just over 6,360 BTC ATMs, according to Coin ATM Radar, an ATM-tracking app. Moreover, the report finds that the Covid-19 pandemic aided market growth by increasing customer demand for advanced crypto ATMs.

Still, there were significant losses as well as crypto exchange trading volumes ended 2022 at their lowest level in two years. Last year, crypto prices also experienced a sharp decline, with Bitcoin trading around $16,000 in December in contrast to $47,000 in January.

Although 2022 had plenty of bad news, such as the collapse of Terra, FTX, Celsius, and 3AC, the community is hopfeul that 2023 will be the long-awaited break everyone is looking for and the eventual end of the bear market.

In 2022, crypto-based projects were subjected to a slew of devastating hacks and exploits, making it the worst year ever for securing digital assets.

Overall, the frequency of crypto hacks increased dramatically this year, surpassing a record $3 billion in total funds lost, a significant increase from the $2 billion lost to hacks in 2021.

As such, here are the biggest hacks of 2022 along with the amount of funds lost:

1. Ronin Network ($625 Million)

2. FTX ($400 Million)

3. Wormhole ($325 Million)

4. Nomad ($190 Million)

5. Beanstalk Farms ($182 Million)

6. BNB Token Hub ($120 Million)

7. Mango Markets ($114 Million)

8. Horizon ($100 Million)

9. Qubit ($80 Million)

The year demonstrated how blackhat or malicious hackers are employing increasingly sophisticated strategies to exploit flaws in decentralized applications, which, like any other piece of software, may contain bugs.

Security cases involving cross-chain bridges and DeFi protocols stood out among the major crypto heists of 2022, causing damages totaling hundreds of millions of dollars in individual exploits. Hackers gained unauthorized access to and stole crypto assets by exploiting vulnerabilities in smart contracts.

Needless to say, security will continue to be among the top goals for everyone as we prepare for what 2023 has to offer.
 

Notable crypto exchange Kraken has decided to close its operations in Japan for the second time after mentioning a strain on its resources in the face of a weak market.

In a blog post published on December 28th, Kraken announced that it has decided to cease operations in Japan and deregister from the Financial Services Agency by January 31st, 2023, as part of efforts to prioritize resources and investments going forward.

The exchange stated that current market conditions in Japan, combined with a weak crypto market globally, mean that the resources required to further expand business operations in the country cannot be justified as of this moment. Therefore, Kraken would no longer serve clients in Japan via Payward Asia.

Kraken appears to have prioritized cost-cutting in recent months. On November 30th, the exchange made one of its most controversial decisions to reduce its global workforce by approximately 1,100 people, or 30% of its headcount, due to difficult and uncertain market conditions.

Kraken also indicated that lower trading volumes and fewer client sign-ups contributed to the decision and that the changes were needed to sustain longevity for the business.
 

Notable Japanese gaming company Square Enix has recently invested over $52 million in Gumi, a game developer, to make high-quality mobile games, blockchain games, and a metaverse initiative, among other things.

Square Enix has also adopted a progressive attitude towards NFTs in the past, and the partnership will reportedly allow Gumi to access certain intellectual property from Square Enix, with the duo potentially collaborating on a game-focused NFT marketplace in the near future.

Square Enix indicated that it is already considering the establishment of a fully dedicated platform for blockchain-based games. The company shall additionally provide a convenient service from the development and distribution of blockchain games to the sale and distribution of tokens and NFTs through the partnership.

Square Enix also revealed plans to work on a slew of NFT games with metaverse integrations, before introducing a new term called Wow and Earn (W&E), which essentially refers to games based on world-famous IP that incorporate blockchain-based Play-to-Earn (P2E) characteristics.

Gumi previously collaborated with Square Enix on various mobile games in the Final Fantasy Brave Exvius series, and both companies are partners in the Oasys blockchain-gaming project, which is developing its own network designed solely for P2E gaming.

Polygon has launched its second public testnet, thereby bringing the platform to the final stages before the mainnet launch. Another zkEVM (zero-knowledge proofs) platform, zkSync, raised $200 million in a Series C funding round last month.

The testnet will put a new upgrade called recursion through its paces, with the goal of exponentially scaling Ethereum. As of this moment, Polygon has not provided a timetable for the mainnet launch.

Polygon claims to be the first zkEVM scaling technology to achieve public testnet with open-source code for its proving system, which is an essential aspect of operating the zkEVM. Although Polygon claims to be open source, it has previously received criticism from various other zkEVM platforms for its broad usage of the term.

Put simply, zkEVMs are a new Ethereum scaling technology which have become very popular over the last year. Although they have yet to be proven, they have the potential to significantly improve transaction costs and speeds for Ethereum, as well as enable on-chain privacy,

Additionally, zkEVMs are said to greatly simplify the process of application development. This could pave the way for a slew of new on-chain apps that bridge the gap between physical assets and off-chain data.

Two top ranking FTX executives have pleaded guilty to federal fraud charges and have agreed to fully cooperate with the authorities.

Meanwhile, Sam Bankman-Fried himself may soon appear in front of a US judge after the decision to extradite him was recently made following a lengthy stay in the Bahamas. SBF will also reportedly be released from jail on a $250 million bailout.

Caroline Ellison and Gary Wang accepted their fate on the eve of December 21st, according to the United States Attorney for the Southern District of New York. Ellison was the former CEO of Alameda Research, and Wang was a founding member of the FTX exchange.

Sam Bankman-Fried has been accused of defrauding customers, investors, and lenders, according to prosecutors. Furthermore, liquidators are sifting through the FTX wreckage in search of up to $8 billion in missing funds.

As if things were not bad enough for SBF, fraud and diverting customer funds to purchase real estate, lend out, make questionable investments through Alameda, and make political donations are among the various charges leveled against him. If found guilty, he faces up to 115 years in prison.
 

Core Scientific is among the most notable Bitcoin miners in the industry, and it just announced that it intends to declare Chapter 11 bankruptcy soon but will continue to mine BTC during the process.

Although numerous mining companies have declared bankruptcy during the ongoing bear market, Core Scientific is the first publicly traded company to do so. Greenridge, another Bitcoin miner, reached a debt restructuring agreement with NYDIG on December 20th, allowing the company to avoid bankruptcy for the time being.

Binance Pool launched a $500 million fund in October to offer emergency financing to distressed miners, with loans collateralized by physical assets along with the crypto mined by the companies. Likewise, Bitmain also launched a $250 million fund with a similar mandate.

Earlier this month, investment bank B Riley proposed a $72 million financing plan to keep Core Scientific from going bankrupt. Most of the main problems with Core Scientific, according to B Riley, are self-inflicted and could be corrected with an open, transparent discussion as well as ongoing participation with its equity holders and creditors.

For now, Core Scientific maintains a positive cashflow, but its income is insufficient to cover the financing costs of its mining equipment due to the bear market, hence the decision to file for bankruptcy.