Samsung’s Bitcoin ETF, $700M bust, Coinbase exits Japan: Asia Express

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

Samsung’s new Bitcoin ETF

On Jan. 13, Samsung Asset Management, a wholly-owned subsidiary of the namesake South Korean conglomerate, successfully listed the Samsung Bitcoin Futures Active ETF on the Hong Kong Stock Exchange. According to local news outlet Edaily, the ETF debuted under the ticker 3135:HK and seeks to replicate the performance of spot Bitcoin by investing in Bitcoin futures listed on the Chicago Mercantile Exchange (CME).

The ETF will also simplify the procedures for investors seeking exposure to regulated Bitcoin products in the Asia-Pacific time zone. Park Seong-jin, head of Samsung Asset Management’s Hong Kong office, commented: 

“Hong Kong is the only market in Asia where Bitcoin futures ETFs are listed and traded in the institutional market. It will be a new option for investors who are interested in Bitcoin as a competitive product that reflects their experience in risk management and risk management.”

North Korean hackers launder 41K ETH

As revealed by blockchain sleuth ZachXBT on Jan. 16, hackers linked to the North Korea-backed Lazarus Group moved close to 41,000 Ether ($63.5 million) from the Harmony bridge hack to Railgun, a platform that uses zero-knowledge technology to obfuscate blockchain transactions.

Funds were allegedly deposited to three different cryptocurrency exchanges after leaving Railgun. The same day, Binance CEO Changpeng Zhao said the exchange, along with Huobi Global, had frozen a portion of the stolen funds and recovered 124 Bitcoin ($2.59 million).

Nomad Bridge TVL before and after the exploit. Source: DefiLlama

Last June, the Nomad cross-chain bridge was drained of over $100 million after suspected North Korean hackers targeted the login credentials of Nomad employees in the Asia-Pacific region. After gaining control of the protocol, the hackers deployed automated laundering programs that moved the stolen assets late at night.

Lazarus Group has been linked to a series of high-profile decentralized finance incidents last year, including the $600 million Axie Infinity Ronin hack, as the sanctions-ridden country turned to hacking and ransomware to make up for its shortfall of foreign currency reserves. 

Bitzlato busted for laundering $700M+

According to a Jan. 18 statement from the U.S. Department of Justice, Hong Kong cryptocurrency exchange Bitzlato was shut down by U.S. and E.U. authorities over allegations that since May 2018 the exchange has processed $700 million in funds linked to illicit activities, including millions in ransomware proceeds. Prosecutors alleged that illicit funds made up a significant part of its trading volume, with Bitzlato only processing around $4.58 billion worth of cryptocurrency transactions since its inception. 

Bitzlato’s website has been taken down following enforcement action. Source: Bitzlato

Anatoly Legkodymov, a Russian national and majority shareholder of Bitzlato, was arrested in Miami on Jan. 17 on charges of conducting an unlicensed money-transmitting business. He faces a maximum penalty of five years in prison if convicted. 

Legkodymov was apparently an OG in the early Bitcoin community. Source: Telegram

Legkodymov, who lives in Shenzhen, China, allegedly implemented minimal Know Your Customer requirements on Bitzlato users, specifying that “neither selfies nor passports [are] required,” and allowing users to signup using information belonging to “straw man” registrants. Authorities said that Bitzlato became a safe haven for illicit transactions and served as the largest counterparty to dark web marketplace Hydra Market. 

“Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shuttered by U.S. and German law enforcement in April 2022. Bitzlato also received more than $15 million in ransomware proceeds.”

Coinbase leaves Japan

In a Jan. 18 statement, cryptocurrency exchange Coinbase said it would cease operations in Japan, citing difficult marketing conditions. According to the exchange, users’ Japanese yen and crypto assets were segregated, and all customers will have until Feb. 16 to withdraw their crypto holdings. Alternatively, users can also liquidate their digital assets and withdraw yen to their fiat bank. 

“Any remaining crypto holdings held on Coinbase on or after Feb. 17 will be converted to JPY. In the month following Feb. 17, Coinbase will send any remaining JPY to a Guaranty Account at the Legal Affairs Bureau in accordance with legal requirements. If customers do not take any action before Feb. 16, they will have to coordinate with the Legal Affairs Bureau to retrieve their JPY balance.”

Coinbase first began its expansion into the Japanese market in 2018. Another crypto exchange, Kraken, ceased operations in Japan on Dec. 28, citing “weak market conditions.” Earlier this month, Coinbase said it would lay off another 20% of its staff amid the ongoing crypto winter. 

Hodlnaut’s angry creditors

On Jan. 13, Bloomberg reported that creditors of Singapore cryptocurrency borrowing and lending platform Hodlnaut refused a corporate restructuring plan and opted for the liquidation of remaining assets. Last August, Hodlnaut suspended all withdrawal, deposit and token swap services. The firm is currently facing a police probe after allegedly misrepresenting its exposure to the Terra USD stablecoin (USTC) and losing investors $190 million in the subsequent Terra ecosystem collapse. 

Japan clarifies NFT tax rules

As first reported by local news outlet Coin Post, Japan’s National Tax Agency released a document on Jan. 13 summarizing the general tax treatment of nonfungible tokens, or NFTs, in the country. Specifically, NFTs are taxed if an individual creates a digital collectible and sells it to a third party and when individuals resell it to another person.

In both cases, sales represent the transfer of viewing rights related to digital art and are classified as business income during primary sales and transfer income during secondary sales, where capital gains rules apply. Moreover, in the event that NFTs were hacked or stolen, individuals can claim either a miscellaneous loss deduction or can include the lost NFT as part of expenses if it was a business asset. 

30,000 e-CNY airdrop prizes claimed in 15 secs 

According to a Jan. 18 report by local news outlet Hangzhou Wang, the City of Hangzhou, in partnership with Chinese food delivery platforms Meituan Dianping and Eleme, airdropped a series of digital yuan central bank digital currency (e-CNY CBDC) vouchers for residents. Once claimed, users could then cash them in at the namesake platforms to purchase deliverables for the upcoming Chinese New Year on Jan. 22.

The only catch? All of the 30,000 e-CNY vouchers were claimed within 15 seconds of launch. Since late last year, the e-CNY has expanded into utilities such as paying for taxes, and local transportation, as well as being included in The People’s Bank of China’s M0 calculations.