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Hong Kong treads fine line on regulating retail crypto trade



Retail investors in Hong Kong may soon be able to buy popular cryptocurrencies like bitcoin at government-licensed exchanges
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Retail investors in Hong Kong may soon be able to buy popular cryptocurrencies like bitcoin at government-licensed exchanges, thanks to new rules meant to bolster the city’s standing as a digital asset hub.

Global crypto markets have yet to recover from a string of high-profile failures in recent months, including the spectacular downfall of trading platform FTX and crypto-friendly US banks Signature and Silvergate.

But the so-called “crypto winter” has not deterred Hong Kong authorities from embracing the sector, a pivot that began last October and culminated with new laws for crypto exchanges starting June 1.

Officials are also hoping the shift will be a boon for the city’s economy, which continues to struggle in the wake of the pandemic, social unrest and the impact on business confidence from a Beijing-imposed national security law.

Crucially, observers say it will cement Hong Kong as a key route for mainland Chinese investors looking to trade crypto, which is outlawed in the country. 

Regulators are hoping to woo firms with favourable business conditions, but must balance that against the need for investor protections — a well-developed area in traditional finance but less so in the virtual-asset space.

“There is an explicit acknowledgement that these products are becoming more and more part of our economy,” Giuliano Castellano, a law professor at the University of Hong Kong, told AFP.

The city has had a voluntary licensing system for crypto trading platforms since 2019, but licensees could only service professional clients with portfolios of at least HK$8 million ($1 million). 

Without licensed local options, Hong Kong’s retail crypto traders are relegated to offshore websites such as Binance and Coinbase, or a raft of brick-and-mortar shops that buy and sell tokens for cash. 

The client-base restriction was unpopular with Hong Kong’s crypto businesses, and officials eventually dropped it when designing the incoming rules.

“The genie’s out of the bottle,” said Kristi Swartz, a fintech lawyer at DLA Piper, referring to retail crypto trading.

“(They) just have to face reality… If it’s already there, let’s try to regulate it.”

– China’s ‘petri dish’ –

Hong Kong is racing regulators around the world to figure out ground rules for crypto, which despite its crashes still has a global market capitalisation of more than $1 trillion.

The European Union earlier this month approved the world’s first comprehensive rules on the sector and international securities watchdog IOSCO proposed its recommendations shortly afterwards.

In contrast to evolving attitudes on crypto worldwide, China has maintained a strict ban since 2021.

Hong Kong — a Chinese city with financial regulations separate from the mainland — holds special appeal for China’s crypto businesses and investors, according to Leo Weese, co-founder of the Bitcoin Association of Hong Kong. 

“There is a huge appetite from… (Chinese) cryptocurrency ventures to have any kind of legal presence on Chinese soil,” he said, adding that firms see it as a gateway to the lucrative mainland market.

In both traditional finance and crypto, it is common for mainland Chinese investors to be recognised as Hong Kong clients if they have a bank account and address in the city.

“Once you have a Hong Kong licence, you are going to be able to convince a lot of your mainland clients… that it’s safe for them to interact with you through their Hong Kong bank account,” Weese told AFP.

Major crypto exchanges like Huobi and OKX, both founded in China, have announced plans to apply for a Hong Kong licence.

While Beijing’s anti-crypto stance remains unchanged on paper, senior economy officials have publicly backed Hong Kong’s ambitions. 

“You can see that China says, ‘Look, if it happens in Hong Kong, population circa seven, eight million, that’s fine. We can use it as our petri dish,'” Swartz told AFP.

– Protecting investors –

Unlike the outgoing system, the retail-friendly rules taking effect in June will be mandatory, meaning all exchanges doing business in Hong Kong will eventually need to get licensed.

Hong Kong regulators said they hope to move quickly on issuing the first licences.

Some crypto businesses say the switch is not expected to disrupt day-to-day operations as authorities allow a one-year transition period. 

HashKey and OSL, the two existing licensees, told AFP they will apply for fresh licences and grow their retail presence. 

“There’s a very significant need in the market to have platforms that are easily accessible… but are also properly managed and properly regulated,” said Michel Lee, HashKey Group’s executive president. 

“This new regime adds a lot more clarity as to what you’re getting, what’s the safety standard you will be provided with.” 

With the memory of FTX’s collapse still fresh, Hong Kong regulators said the new rules aim to “provide robust investor protection and manage key risks”. 

One safeguard is that exchanges can only provide “large-cap virtual assets” — such as bitcoin and ethereum — to retail investors, and must set up internal committees to decide which cryptocurrencies to offer.

Retail clients also have to undergo knowledge tests and risk profiling before they can trade — though it remains unclear what level of knowledge is deemed enough.

Meanwhile, products like stablecoins and crypto derivatives are off-limits for retail investors for the time being.

“The new regulations are meant to protect investors better,” said Castellano, the legal scholar.

“It’s wise to have a cautionary approach.”

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Google looks to take generative AI lead with Gemini




Google is giving its Bard chatbot a major artificial intelligence boost as ChatGPT-maker OpenAI deals with the aftermath of a boardroom coup that saw chief executive Sam Altman fired then rehired within a span of days
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Google on Wednesday infused its Bard chatbot with a new-generation artificial intelligence model called Gemini, which it touts as being able to reason better than ChatGPT and other rivals.

The search engine juggernaut is aiming to take the generative AI lead from ChatGPT-maker OpenAI as that company deals with the aftermath of a boardroom coup that saw chief executive Sam Altman fired and then rehired within a matter of days.

Google has for years discreetly developed AI powers but was caught off guard when OpenAI late last year released ChatGPT and teamed up with Microsoft to make its capabilities available to users worldwide.

“This is incredible momentum, and yet, we’re only beginning to scratch the surface of what’s possible,” Google chief executive Sundar Pichai said in a release.

“This new era of models represents one of the biggest science and engineering efforts we’ve undertaken as a company.”

It is the first AI model to outperform human experts in certain benchmarks involving problem solving, math, physics, history, law, medicine and ethics, Google DeepMind vice president of product Eli Collins said during a briefing.

A demonstration showed Gemini recognizing what it was shown, from a person acting out a “Matrix” movie scene to someone drawing a duck and then holding up a rubber duck.

Gemini commented on what it was shown, making comparisons, drawing conclusions, and offering suggestions.

Performance of an “Ultra” version of Gemini “far exceeds” that of other state-of-the-art models in 30 benchmark tests measuring capabilities such as image understanding or mathematical reasoning, according to Collins.

A “Pro” version of Gemini built into Bard is designed to handle a wide range of tasks. A “Nano” version is tailored for smartphones, coming first to Google’s top-of-the-line Pixel 8 handset.

Google raced out its own Bard chatbot earlier this year, continually updating the chatbot based on people’s feedback, according to Bard vice president Sissie Hsiao.

“All of that rapid innovation is bringing us to what we see as a truly transformative moment,” Hsiao said during the briefing.

“With Gemini, Bard is getting its biggest upgrade yet.”

– AI collaborator –

Bard will use Gemini for more advanced reasoning, planning, and understanding capabilities, a demonstration showed.

It will be available in English in more than 170 countries and territories, with more languages added soon, according to Hsiao.

Gemini-infused Bard will be expanded to be “multi-modal,” meaning it will be able to work with auditory and visual input as well as text prompts, executives said.

“With Gemini we are one step closer to our vision of bringing you the best AI collaborator in the world,” Hsiao said.

Gemini ramps up the quality of Bard’s performance, whether in writing poetry or computer code to shopping queries or research projects, according to Hsiao.

The “Ultra” version of Gemini designed to handle highly complex tasks will be released early next year, Google said.

“I’m in awe of what it’s capable of,” Collins said of Gemini.

“This is the start of a new era for us at Google as we continue to rapidly innovate and advance the model’s capabilities.”

Google in September integrated Gmail, YouTube and other tools into its Bard chatbot as tech giants seek to persuade users that generative AI is useful and not dangerous or just a fad.

Those capabilities closely match offerings from Microsoft that infuse its Office 365 apps with AI powers, though those come at an extra cost to customers and are not available through the chatbot on its search engine Bing.

The staying power of generative AI chatbots, once the initial excitement has faded, is yet to be confirmed.

Moreover, integration of the OpenAI-based chatbot into Microsoft’s search engine earlier this year failed to make an impact on Google’s overwhelming dominance of search.

Governments and tech companies however insist that generative AI is technology’s next big chapter and have ramped up spending on new products, research, and infrastructure.

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EU proposes three-year delay on UK electric car tariffs




The U-turn by the European Commission delays a 10% tariff on electric car sales between the EU and UK for three years
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Brussels proposed Wednesday a three-year delay on tariffs on the sale of electric vehicles between Britain and the EU that was meant to kick in from January, in a major reversal of its previous position.

The European Commission said it now wants a one-off extension, until December 31, 2026, after the EU automotive industry raised concerns about the massive costs that would arise from a post-Brexit 10-percent tariff.

The commission’s extension proposal must formally be approved by the EU member states. EU leaders are to hold a regular summit in Brussels next week.

The commission had initially strongly opposed such an extension, despite industry’s pleas, requests from the British government and calls for pragmatism by EU lawmakers.

Its extension proposal, which also covers batteries, includes wording designed to make it legally impossible to put off tariffs beyond the December 2026 date.

“Today’s decision means that we skip an intermediate phase of somewhat strict rules of origin that would have applied from 2024 until the end of 2026,” Commission Vice President Maros Sefcovic said.

“This removes the threat of tariffs on export of EU electric vehicles to the UK and vice versa on 1st January 2024.”

The change of stance was needed because of “circumstances not foreseen” when an EU-UK agreement regulating post-Brexit trade and ties was signed in 2020, Sefcovic said.

He cited higher energy prices spurred by Russia’s full-scale invasion of Ukraine last year, high inflation, and big subsidies China and the United States deploy to boost their electric-vehicle industries.

The European Automobile Manufacturers’ Associations (ACEA) and the UK’s Society of Motor Manufacturers and Traders (SMMT) welcomed the commission’s move and urged EU countries to endorse it.

The tariffs, ACEA said, would have cost the EU vehicle makers it represents 4.3 billion euros ($4.6 billion) over the next three years and caused them to lose market share to non-European competitors.

The extension would “allow UK and EU manufacturers to compete with the rest of the world and, crucially, give the European battery industry time to catch up,” Mike Hawes, SMMT chief executive, said.

– ‘Cannot be repeated’ –

The European Union is particularly concerned about potentially unfair competition from cheaper Chinese electric vehicles. In October it formally launched an investigation into Beijing’s subsidies for car manufacturers.

Commission chief Ursula von der Leyen accused China in September of keeping the cost of Chinese electric cars “artificially low by huge state subsidies”.

Sefcovic said the commission’s proposal “supports the competitiveness of our industry and protect jobs in the European Union” and “it’s absolutely clear that this one-off extension cannot be repeated nor prolonged”.

Britain formally left the European Union in January 2020 then, during a transition period, sealed the post-Brexit free-trade agreement with the bloc which came into effect in 2021.

Under that deal, tariffs were to start on January 1, 2024, on vehicles that do not have at least 45 percent UK- or EU-made content, and with batteries that are at least 50-60 percent sourced from each of those territories.

Along with the extension proposal, the commission announced additional funding of up to three billion euros to boost the EU’s battery-manufacturing industry.

The EU’s trade commissioner, Valdis Dombrovskis, said the proposal “provides much-needed predictability and stability to EU car- and battery-makers at a time of fierce global competitive pressure”.

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Twitch to shut down in SKorea over ‘seriously’ high fees




The platform said it had tried to lower its costs by reducing the maximum video quality but it was still losing money
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US-based streaming platform Twitch said Wednesday it would stop its service in South Korea in February because of “seriously high” network costs, dealing a blow to millions of users in one of the heartlands of e-sports.

The Amazon-owned company said in a statement signed by CEO Dan Clancy that costs were 10 times higher than most other countries, making it impossible to continue operating.

South Korea allows internet service providers to charge data-heavy companies like Twitch extra fees, which has already led to a long dispute with Netflix.

Big telecom firms in Europe have pushed for a similar deal, which they call “fair share”, but an EU consultation concluded in October that the idea was not popular.

Twitch said it had tried to lower its costs by reducing the maximum video quality but it was still losing money and would pull out of the country on February 27.

“The cost of running Twitch in South Korea is currently seriously high,” said the statement.

– ‘Stellar player’ –

Twitch, acquired by Amazon in 2014 for close to $1 billion, gained significant traction among gamers in South Korea.

The firm does not publish user numbers but it was widely reported in 2021 to have six million users in South Korea, more than four percent of its global total.

The country is known for its passionate, competitive, and dedicated gaming community, as well as its megastar Faker — a gamer hailed as the Michael Jordan of e-sports.

“We would like to reiterate that this was a very difficult decision, and one that all of us at Twitch are deeply saddened by,” the company’s Wednesday statement said.

“South Korea has always been a stellar player in the global e-sports community and will continue to do so.”

Shares in South Korean video streaming service Afreeca TV, Twitch’s competitor, soared almost 30 percent in afternoon trading in Seoul.

Some of the country’s Twitch users were devastated by the news.

One streamer, yummy_2 said: “It feels like losing my job right now.”

– Biden vs Trump –

Netflix was the first major international firm to cry foul over South Korea’s rules on network fees, getting entangled in lawsuits with SK Broadband, one of South Korea’s biggest internet service providers.

However, the two firms announced in September they would drop the legal cases and would now instead “collaborate as partners for the future”.

While the usage fees are a boon to telecom companies, they are bitterly opposed by tech platforms around the world.

European lawmakers and digital rights activists also argue such an arrangement could break rules on net neutrality, whereby telecoms firms are barred from selling faster internet speeds to particular companies.

The issue has been at the heart of a years-long dispute in the United States with former President Donald Trump rolling back net neutrality rules and his successor Joe Biden struggling to restore them.

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