CZ hits back at WSJ, Hong Kong crypto ETF’s take ‘$50B equivalent’: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Binance is under scrutiny yet again 

Cryptocurrency exchange Binance has been accused of firing its own investigators after discovering that its VIP client, props trading firm DWF Labs, engaged in alleged acts of market manipulation. 

A May 9 Wall Street Journal report claimed that DWF Labs engaged in market manipulation, wash trading, and inflated trading volumes amounting to $300 million through deals with crypto projects. After the exchange’s surveillance team recommended offboarding the client, Binance allegedly sided with DWF Labs and fired the investigator, arguing insufficient evidence for the claim.

DWF Labs co-founder Andrei Grachev. (X)

Binance has denied involvement. “We affirm our strict market surveillance program. We do not tolerate market abuse,” said the exchange in a tweet. “Market maker competition is fierce and our investigation team’s job is to be neutral and look at the evidence without any bias, including bias that might come from market-making firms’ claims against their competitors.”  

According to the exchange, its staff has offboarded 355,000 users with a transaction volume of $2.5 trillion for violating its terms of use in the past three years. 

DWF Labs, too, has denied the allegations. “We want to clarify that many recent allegations reported in the press are unfounded and distort the facts,” they said. “DWF Labs operates with the highest standards of integrity, transparency, and ethics, and we remain committed to supporting you and our over 700 partners across the crypto ecosystem.”

Binance’s co-founder and spouse of its co-founder and former CEO Changpeng Zhao, penned a response dripping in irony, writing: 

“I am very grateful to the WSJ for their consistent and long-term devotion to Binance, which has greatly increased our exposure and saved us a lot of marketing budget. However, I have noticed an interesting phenomenon where some mainstream media articles are increasingly driven by emotions and biases rather than facts. For example, the complaints of former employees can become the basis of an article, while Binance’s proactive assistance to law enforcement agencies in investigating and apprehending the mastermind behind Zkasino (as a matter of fact) is not deemed worthy of reporting.” 

DWF Labs is a prominent trading firm in the crypto industry. Founded by Andrei Grachev in 2021, the firm invests in promising projects and provides long-term financial support to them, as stated on its website. 

Thailand Web3 Music Festival concludes 

Music idol protocol Fansland’s music festival in Bangkok, Thailand attracted over 30,000 festival go-ers from May 4 to 5. 

The Web3 aspect was perhaps of less appeal than a performance by South Korean pop star PSY, the creator of “Gangnam Style.” More than 20 other artists graced the stage, including renowned Cantonese Hip-Hop artist Edison Chen, powerhouse vocalists Henry Lau, Gen1es, BKPP, Chanyeol, BUS, Dreamnote, Pretzelle, Sistar19, Taemin, and 24kGoldn.

“Their electrifying performances set the stage ablaze, creating an atmosphere of pure excitement and energy that left the audience in awe,” organizers breathlessly reported.

In addition to human performances, the festival featured tokenized music products and AI-generated music idols.

The festival featured a unique NFT ticketing system where tickets were minted as NFTs on Fansland and became tradable on secondary markets. The tickets can also be used as an access point to interact with Fansland DeFi.

The first batch of NFT ticket holders for this music festival automatically became early participants in Fansland.AI, unlocking perks such as token airdrops and future whitelist qualifications.

Fansland aims to create a decentralized fan economy infrastructure so that global music lovers can interact with their singers and idols. It focuses on Web3 music festivals, NFT ticketing, and real-world asset DeFi. Last month, Fansland secured a $10 million funding round led by IME, Linear Capital, and Falablock. 

The debut of the Fansland music festival in Bangkok.

Hong Kong ETFs attract $317M, but can it last?

The total assets under management of six Hong Kong spot Bitcoin and Ether ETFs have surpassed $317.4 million since their inception on April 30. 

Data from local crypto exchange OSL, which also serves as the trading platform and sub-custodian for a few of the aforementioned ETFs, show that a combined 2,079.42 Bitcoin (BTC) and 396.79 Ether (ETH) have flowed in. 

“Together, we have addressed some of the most intricate challenges of our industry —regulated digital asset custody, ensuring stable liquidity, and bridging traditional financial markets with the speed of on/off-chain operations,” commented Patrick Pan, CEO of OSL.

The Hong Kong spot crypto ETFs are denominated in three fiat currencies and allow investors to subscribe and redeem ETF units in both crypto and fiat. However, it appears that the vast majority of assets managed by the ETFs — well over $200 million, were subscribed prior to their listing. 

As per data compiled by Farside Investors, total asset flow into the six ETFs has amounted to just $24.7 million since April 30, a mere fraction of the tens of billions of dollars that went into U.S. spot Bitcoin ETFs in their first week of launch. 

Nevertheless, many industry veterans remain optimistic

“The HK ETFs at $310m is equiv to $50b in US market,” said senior Bloomberg ETF analyst Eric Balchunas on April 6, in reference to the Hong Kong market’s relative size and liquidity compared to the United States. “So in that regard these ETFs already as big to their local mkt as US ones are to its.”

ApolloSats co-founder Thomas Fahrer claimed “rumors are swirling of a pending approval into Hong Kong Stock Connect which would allow Mainland Chinese to invest and could ignite this market.” However these are merely rumors and mainland Chinese investors are currently prohibited from accessing the Hong Kong crypto ETFs, barring a population of over 1 billion from entering the space. 

Despite high hopes, the Hong Kong crypto ETFs did not attract as many assets as expected.

$128 million pledged for Hong Kong crypto ETF liquidity fund 

Market makers remain bullish on the prospects of the Hong Kong ETFs. 

On May 8, digital asset managers LD Capital, Antalpha Ventures, and Highblock pledged a total of $128 million “to provide market-making services to Hong Kong ETFs, aimed at enhancing liquidity, improving the efficiency of capital flows, and reducing the risks associated with liquidity fluctuations and transactional volatility.”

LD Capital is a digital asset fund with a focus on primary and secondary blockchain investments, with over 300 blockchain enterprises in its portfolio. Antalpha Ventures is a financial services platform affiliated with Bitmain, a major manufacturer of Bitcoin mining ASICs. 

Highblock Limited, which was established by former executives from major international digital asset trading platforms, has more than ten years of experience in blockchain quantitative trading. The company is licensed for digital asset quantitative trading in Hong Kong and provides quantitative trading and investment portfolio management services in the digital asset sector.

The liquidity addition may be significant as due to liquidity restraints in the Hong Kong market and ongoing market downturn in China, the six spot crypto ETFs only saw trading volume of around $100 million on day one.