The Hong Kong Exchange (HKEX) published a report recently that focused on blockchains and artificial intelligence (AI) applications in the securities industry.
The report, published on October 18 and written by the Chief China Economist’s Office and Innovation Lab at HKEX, stated that FinTech firms utilising cryptocurrency should be subjected “to the governance by the Securities Law.” According to recent reports, HKEX might be thinking about a change in business strategy, and the blockchain sector might just be the answer.
HKEX is the world’s sixth-largest stock exchange and Asia’s third-largest operator by market cap. The research paper released by the exchange detailed the need for finance and crypto to be bound by similar legal frameworks. HKEX noted that there is a need to apply the existing laws of finance to companies in the FinTech industry due to their resemblance to traditional services. The report also stated that regulators need to keep up with the pace of financial technologies. What the report suggests is that digital assets could be monitored by an existing security regulatory framework, while the blockchain could be integrated into the investment, trading, clearing, and settlement industry.
The HKEX research paper also proposes that Hong Kong regulators integrate AI and Big Data into its system to establish an effective regulatory technology (RegTech) system, which could be enhanced to include Know Your Customer and identification controls. A functional RegTech system would enable crypto and blockchain startups approach auditing and legalities faster. They would be able to put their business documents online to gain approvals rapidly.
The report also noted that blockchain has different regulations in different jurisdiction and that the “principle of consistency requires that […] the issuance of digital currencies and digital funds must be governed under the existing securities regulatory framework.” The report additionally stated that pubic fundraising should be subjected to the Securities Law.
There were also concerns on the possibility of a large-scale deployment of the blockchain posing a risk. The authors of the report expressed, “As each node has a ledger of the whole chain, any successful hacking will not only expose data of the hacked node to theft but also expose all data in the full ledger to potential replication.”
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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Cryptocurrency mining company Bitmain has officially filed its initial public offering (IPO) with the Hong Kong Stock Exchange. The IPO was submitted this past Wednesday in its draft form, meaning that it still has to face hearings by the exchange. Since many of the details in the application are redacted, it is still unknown what the firm’s value will be when, and if, the IPO is accepted.
According to the grossly redacted IPO application (in pdf), Bitmain earned over $2.51 billion in revenue last year, up from the $277,612 reported a year earlier. After adjusting for expenses and costs, the company’s net profits were $113.5 million in 2016 and $952.5 million last year. It also reported a net profit of $952.1 million in the second quarter of this year, according to the filing.
Bitmain has been embroiled in a fair amount of controversy over the past few months, the majority of which stems from apparently false assertions by the company. In a funding round this past summer, it said that it had received funding from Japanese banking giant Softbank and China’s Tencent, both of which were found to be false. Additionally, it has repeatedly discussed its strong financial position in public, but released internal documents painted a different, much bleaker financial position.
Those concerns have led many to question the credibility of the company, especially as it has been preparing to go public. There have also been concerns raised about support by Bitmain, and its co-founder, Jihan Wu, of changes to Bitcoin BCH mining protocols. Specifically, the introduction of the canonical transaction ordering rule (CTOR), which was created by Bitcoin ABC and backed by Bitmain, could result in a complete network alteration.
Bitmain has sided rigorously and publicly with Bitcoin ABC on the topic, which is forcing the network to accept what the developers want, and not what the community wants. However, as Bitmain says in its IPO, the members of the mining community need to support the idea for it to be accepted. It’s another example of Bitmain’s sneaky and misleading tactics – offering one story in public and then hiding behind a façade to force their internal objectives.
The IPO seems to indicate strong support for the Nakamoto consensus and the ability for miners to decide the direction in which the blockchain heads. However, this is precisely the opposite of the position stated openly over the past couple of months.
There also seems to be an indication that the amount of hash controlled by Bitmain isn’t as significant as the company would like everyone to believe, and that it may not even be owned by Bitmain. This could lead to mining operators jumping over to other mining code implementations, such as Bitcoin SV, to escape the mindless and reckless off-chain networking that Bitmain has supported. Along those same lines, since the IPO provides the idea that Bitmain doesn’t control a significant amount of hash, the current Bitcoin BCH “hash war” that some pundits suggest could lead to a new split might be nothing more than a bluff – Bitmain doesn’t have the resources to back up its fight.
The IPO could do more harm than good for a company that is already reeling from a series of setbacks. It hasn’t been able to produce quality products that can compete against other miners on the market and the majority of its “cash” is tied up in inventory that sits in a warehouse unsold. While many IPOs are joyous events, this feels like a desperate gasp.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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