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Tech Developments in APAC: Review and 2020 Outlook - Crypto-assets

Risk and regulation

15 April 2020

As we enter a new decade and in this year of the rat, we look - in a series of articles - at tech developments in APAC, with a particular emphasis on the jurisdictions of Australia, China, Hong Kong and Singapore.

The key developments to note are in:

  • AI: The use of AI, whilst creating huge opportunities in areas such as financial services, healthcare and autonomous vehicles, also brings the potential for significant legal, ethical and reputational exposure.  APAC regulators have been considering these risks and we look at the various guidelines and ethical frameworks that have been published. [Read our article in the first part of this series focussing on AI developments and outlook]
  • Crypto-assets: Globally, crypto-assets were hardly out of the press (or the crosshairs of regulators) in 2019 and early 2020 with Facebook's proposed stablecoin Libra in its various iterations taking the lion's share of headlines.  In APAC, we saw national initiatives in crypto-regulation in Hong Kong, Singapore and Australia and some of the first crypto-cases.
  • Big Tech and Data: Big Tech firms refer to large companies with established technology platforms such as Alibaba, Amazon, Facebook, Google and Tencent.  The financial services offerings of Big Tech firms are expected to grow with anti-trust and data privacy concerns arising from their significant resources and widespread access to customer data. [Read the third article in this series focussing on Data]
  • Patent and IP Protection and Alternative Dispute Resolution: Arbitration is  becoming an increasingly popular method of resolving IP disputes in light of its advantages including confidentiality, choice of specialist arbitrators and enabling the avoidance of multiple parallel proceedings in different jurisdictions.  Various developments in arbitration in Hong Kong and Singapore in 2019 will facilitate this.  We anticipate an increase in arbitration of FRAND / SEP and other patent and IP disputes, consistent with the growth of IP and technology disputes in previous years.  [Read the final article in this series on patents and IP]

Over the course of four articles we will be looking in more detail at each of these areas. In this second part of the series we focus on Crypto-Currencies and Assets.

Crypto-Currencies and Assets

Crypto-assets were hardly out of the press (or the crosshairs of regulators) in 2019 and early 2020 with Facebook's proposed stablecoin Libra in its various iterations taking the lion's share of headlines.  We saw a new global consortium for digital currency governance by the World Economic Forum; the G7 working group on stablecoins issuing its report on the impact of global stablecoins; the International Organisation of Securities Commissions (IOSCO) issuing a report on the application of existing principles to global stablecoins including a hypothetical case study; and crypto-regulation in the form of Financial Action Task Force AML standards for virtual asset service providers.  For more on Libra and stablecoins, read our comprehensive report on the global regulation of stablecoins and our Libra publication explaining what it is and the challenges it faces.

Moving the focus back to APAC, in 2019, we saw national initiatives in crypto-regulation in Hong Kong, Singapore and Australia and some of the first crypto-cases.

2019 Developments and Review


In November 2018, the SFC announced in a Circular on Regulatory Standards for Licensed Corporations Managing Virtual Asset Portfolios, the publication of a proforma set of terms and conditions.  They are imposed on licensed corporations which manage or plan to manage portfolios with

  • a stated investment objective to invest in virtual assets, or
  • an intention to invest 10% or more of the gross asset value of the relevant portfolio in virtual assets.  

Later, in March 2019, the SFC published a Statement on Security Token Offerings, which served as a reminder of the legal and regulatory requirements applicable, as security token offerings likely constitute "securities" under the Hong Kong Securities and Futures Ordinance, and are subject to Hong Kong securities laws.

Also in March 2019, the HKMA issued a Circular on a Statement on Crypto-assets by the Basel Committee on Banking Supervision (BCBS) , which sets out the BCBS' expectations regarding banks' exposures to crypto-assets.  It highlights the BCBS' concerns on the safety of crypto-assets as a medium of exchange or store of value, as they are not regarded as legal tender, nor backed by any government or public authority.  The HKMA stated that authorised institutions planning to engage in activities related to crypto-assets, should discuss with the HKMA and demonstrate that they have put in place appropriate systems and controls to identify and manage associated risks.

In May 2019, the Australian Securities and Investments Commission (ASIC) updated its Information Sheet 225 (INFO 225) on initial coin offerings (ICOs) and crypto-assets first published in September 2017.  ASIC highlighted that ICOs and crypto-assets often are or involve financial products that are regulated under the Corporations Act.  Further, the Australian Treasury had noted in an issues paper that many ICOs have turned out to be scams.  To distinguish themselves, businesses seeking to operate lawfully and legitimately are required to carefully consider INFO 225.   

Most recently, November 2019 saw the SFC Position Paper on regulation of virtual asset trading platforms, which explains in more detail the regulatory framework that the SFC announced in 2018.  The SFC describes the regulatory standards to be adopted as comparable to those applicable to licensed securities brokers and automated trading venues.  Licensing conditions include the requirement that the platform operator only offer its services to professional investors and provide services to clients who have sufficient knowledge of virtual assets.  Platform operators must also have stringent criteria for the virtual assets to be traded on their platforms, and are required to adopt a reputable external market surveillance system and put in place an insurance policy covering associated risks.  Licensed platforms will be placed in the SFC Regulatory Sandbox for a period of intensive supervision.  To find out more, please find our briefing on the position paper here.


In terms of possibly the first trial of a crypto-currency dispute, March 2019 saw the first instance judgment of B2C2 Ltd v Quoine Ltd in Singapore with the Court of Appeal judgment following in February 2020.  See summary in the section above on the theme of AI.

In Hong Kong, in the November 2019 case of Samara v Dan [2019] HKCFI 2718, a Mareva injunction was granted (and an associated discovery order made) to freeze a certain number of bitcoins in the Defendant's name remaining in an account with an insolvent cryptocurrency exchange.  The court concluded that the Plaintiff had shown a good arguable case of fraud and dishonesty on the part of the Defendant and the Defendant's confidentiality and privacy objections were rejected.  The subject of the case were bitcoins transferred to the Defendant as agent to sell on the Plaintiff's behalf.  The dispute concerned the Plaintiff's original ownership and proof of transfer to the Defendant (the Plaintiff claimed that ownership could only be proven by possession of a seed to the bitcoin wallet which he no longer possessed or could remember) and in relation to bitcoins where transfer was not disputed, what transfers and cash payments had been returned to the Plaintiff.  As cryptocurrencies become more prevalent, disputes will only increase with unique issues that come with new technologies to be determined.   

2020 outlook

Regulators' focus on crypto-assets is expected to continue into 2020 as illustrated by IOSCO's publication of its 2020 work programme in January 2020, which highlighted IOSCO's continued focus on five priority issues first identified by its board in 2019 including crypto-assets, as well as AI and machine learning. To facilitate regulators' work, IOSCO further published a report in February 2020 highlighting the following areas as ones regulatory authorities should consider in the context of crypto-asset trading platforms: access; safekeeping of participant assets; conflicts of interest; transparency of operations; market integrity and the monitoring and enforcement of trading rules; price discovery, and resiliency of technology and cybersecurity.

In 2020, Singapore will see proposals from a consultation published in November 2019 enacted into law.  The relevant consultation paper sets out MAS' proposed regulatory approach under the Securities and Futures Act for derivatives contracts that reference payment tokens (including bitcoins) as underlying assets.  MAS intends to regulate payment token derivatives offered by approved exchanges through definition as an underlying thing in the Securities and Futures (Prescribed Underlying Thing) Regulations 2018; and impose on certain financial institutions regulated by MAS margin collection and risk warning obligations, as well as restrictions on advertising.  These obligations and restrictions are intended to apply with respect to retail investors by 30 June 2020.

The Australian Prudential Regulation Authority (APRA) has also indicated its focus on fintech and regtech and published its submission to the Senate Select Committee in January 2020. The submission outlines how APRA is evolving its regulatory framework and approach to support the developing fintech and regtech sectors, while ensuring risks are appropriately managed in line with APRA’s mandate of financial soundness and stability. It also highlights that improving cyber resilience across the financial system is one of APRA's four strategic focus areas in the 2019-2023 Corporate Plan. APRA intends to understand and support these developments in a sustainable and open fashion.