Prometheum Investor Gets Hong Kong Crypto Exchange License; CFTC Friction Reported

Prometheum investor gets license

Hashkey Group, announced it is among the first crypto exchanges to receive “Type 1 and Type 7 Licences” under Hong Kong’s new crypto regulatory framework. Read the release.

U.S. crypto regulation aficionados may recall that Hashkey Group is a subsidiary of Wanxiang Blockchain which is an investor in U.S.-based Prometheum. Prometheum was granted “a first-of-its-kind Special Purpose Broker-Dealer (SPBD) for digital asset securities” earlier this year by the Securities and Exchange Commission (SEC).  Then, in mid-June, Prometheum CEO Aaron Kaplan appeared as a witness at a House Financial Services hearing on digital assets, which raised questions about Prometheum’s SPBD.

On July 10, Republicans led by Senator Tommy Tuberville (R, AL) asked U.S. Attorney General Merrick Garland and Securities and Exchange Commission (SEC) Chair Gary Gensler for an investigation into Prometheum and Wanxiang Blockchain’s relationship expressing concerns about Wanxiang Blockchain’s ties to the Chinese Communist Party.

Yesterday, Hashkey Group emphasized in a press release its consumer protections in light of the new Hong Kong license: “User funds are kept under segregated accounts, separated from platform operations, with 98% in cold storage and 2% in hot wallets. In addition, the platform strictly adheres to regulatory requirements and undergoes regular audits and compliance inspections conducted by the Big 4 auditing firms, establishing itself as one of the most secure exchanges globally.”

Bloomberg reports that Hashkey was looking to raise $100-200 million in May in an effort to support growth of the company. The company’s Chairman and CEO, Dr. Xiao Feng, is also Vice Chairman and Executive Director of China Wanxiang Holding, and Chairman and CEO of Wanxiang Blockchain.

CFTC commish friction

Politico says Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam and Commissioner Christy Goldsmith Romero aren’t seeing eye-to-eye on certain policy decisions with the Chair leaning more to the right then Goldsmith Romero. After Behnam partnered with CFTC Republicans on loosening capital requirements for certain derivatives, Goldsmith Romero took exception and said, “‘We don’t know what the consequences are going to be’ of easing requirements from the 2010 Dodd-Frank law,” according to Politico. Read more.

Other positions Goldsmith Romero has taken on crypto in the past year include support of legislative efforts, “privacy without anonymity” and consideration on tiered investor definitions for retail.

Meanwhile, Behnam, former senior counsel to Senate Agriculture Committee Chairwoman Debbie Stabenow (D, MI), has been openly supportive of moving crypto spot market jurisdiction under the CFTC and was instrumental in the creation of the Digital Commodity Consumer Protection Act (DCCPA) in the last Congress until FTX’s implosion forced Senate Agriculture Committee leaders to abandon the bill. He returned to the House Agriculture Committee this past June to express support of the new digital assets market structure bill.

opinion on court opinion

In The Financial Times, Todd Baker, a senior fellow at Columbia University, offers his take on the recent bankruptcy court decision with regards to Terraform Labs, its founder, Do Kwon and securities laws. Baker thinks Judge Jed Rakoff’s decision spells d-o-o-m for crypto and tweeted, “The #cryptotrading crowd and their legal enablers may have met their match in Jed Rakoff.”

In his op-ed, he concludes, “It’s hard to argue with Judge Rakoff about securities law, as many a litigant has learned over the years. The Ripple case crypto balloon may have been filled with laughing gas after all.” Read more.

industry – developer growth

In a new report from U.S.-based Web3 developer Alchemy, the company claims that Web3 developer activity increased in the second quarter of this year – both  year on year and quarter on quarter. TechCrunch covers the news and says, “Ethereum and crypto wallet software developer kits (SDKs) saw 26.8 million and 11.1 million installations in the second quarter, respectively.”

Another cut of the numbers: Ethereum developer kits annually over the last five years:

2019 Q2 – 2.9 million
2020 Q2 – 4.7 million (+66% Y/Y)
2021 Q2- 7.4 million (+58% Y/Y)
2022 Q2 – 19.5 million (+163% Y/Y)
2023 Q2 – 26.8 million (+37% Y/Y)

Read more. And, get the report.

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