Wu’s Weekly Picks: Hong Kong to Announce New Rules for Retail Trading, Core PCE Index Exceeds Expectations, Multichain Cross-Chain Abnormalities, and Top 10 News (May 20-26)

Author | Wu Shuo Blockchain Lily

Top 10 News of the Week

1. Hong Kong to Allow Retail Trading of Major Cryptocurrencies

On May 23, according to Bloomberg, Hong Kong will announce that retail investors can trade cryptocurrencies under new rules for the digital asset industry. It is expected that individual investors will be able to trade tokens such as BTC and ETH with appropriate safeguards starting next month.

On the same afternoon, the Securities and Futures Commission (SFC) of Hong Kong published a consultation conclusion on the regulation of virtual asset trading platforms, with the vast majority of respondents agreeing with the proposal to permit licensed trading platform operators to offer services to retail investors. The SFC will implement a range of measures to safeguard these investors, including ensuring suitability, good governance, enhanced token due diligence, incorporation of standards and disclosure in the process of establishing business relationships with clients. The SFC welcomes virtual asset trading platform operators who are ready to comply with its standards to apply for a licence. As for operators who have no intention of applying for a licence, they should take steps to wind down their business in an orderly manner in Hong Kong.

The SFC document stated that opinions were given on the requirement for non-securities type tokens to have at least 12 months of track record. The regulatory arrangement for stablecoins is expected to be implemented in 2023/24. Before stablecoins are subject to regulation in Hong Kong, we believe they should not be admitted for retail trading.

The SFC said that with regard to proprietary trading, we agree that liquidity on the trading platform is important to clients. Therefore, the SFC allows third-party market makers to engage in liquidity provision activities. However, the current prohibition on proprietary trading is comprehensive and effectively prohibits licensed virtual asset trading platform group companies from having any virtual asset positions.

The platform operator should not provide reward activities related to the trading of specific virtual assets. This principle forms the basis for the requirement that platform operators should not publish any advertisements relating to specific virtual assets.

1. Regarding other common services in the virtual asset market (such as yield, deposits, and loans), the China Securities Regulatory Commission does not allow licensed virtual asset trading platforms to provide these services.

2. Summary of US economic developments this week

a. Powell: The Fed is committed to bringing the inflation rate down to 2%

On May 20, according to WSJ, Federal Reserve Chairman Powell’s latest remarks indicated that the pressure on the banking system may mean that the central bank does not have to raise interest rates to such a high level to slow economic growth. Some officials, including Powell, hinted that they might pause rate hikes to assess the impact of banking stress. Powell said that the Fed is committed to bringing the inflation rate down to the target of 2%. “Failing to lower inflation not only prolongs pain, but ultimately increases the social cost of restoring price stability, causing greater harm to families and businesses.”

b. St. Louis Fed President: The Fed needs to raise interest rates twice by 25 basis points this year

On May 22, according to @NickTimiraos, St. Louis Fed President James Bullard said that the Fed needs to raise interest rates twice by 25 basis points this year. “The U.S. economy has grown quite strongly in 2023, but the rate of decline in inflation is not fast enough. “For this reason, I think we will have to raise policy rates.”

c. US April core PCE price index annual rate 4.7%

On May 26, the US announced that the April core PCE price index annual rate was 4.7%, with an expected value of 4.60% and a previous value of 4.60%. The monthly rate of the US April core PCE price index was 0.4%, reaching a new high since January 2023. US short-term rate futures cut earlier gains after inflation data was released, with traders increasing their bets on further rate hikes by the Fed.

3. Multichain cross-chain anomalies

a. Multiple users reported that there are abnormal delays in the arrival of cross-chain funds in Multichain

On May 24, multiple users reported that there are abnormal delays in the arrival of cross-chain funds in Multichain. Previously, Multichain had announced that it would complete the upgrade within 24 hours, but many users now report that their cross-chain funds have been delayed for up to 48 hours or even 72 hours. Multichain officials responded on Discord that the upgrade of the back-end node took longer than expected. Most routes are working as usual, while some routes (Kava, zkSync, Polygon zkEVM) are temporarily suspended. All affected transactions will arrive after the upgrade is completed.

b. 494,200 $MULTI (3.17M$) transferred to Gate, Fantom Foundation withdraws $MULTI liquidity

On May 24th, according to 0xScope, the address 0xb4df associated with @MultichainOrgteam transferred 494,200 $MULTI (3.17M) to Gate. $MULTI has fallen 19.24% in the past 24 hours.

On the same day, according to Lookonchain, the Fantom Foundation address withdrew liquidity of 449,740 MULTI (2.4M) from SushiSwap.

c. Multichain states that some cross-chain routing cannot be used due to force majeure, link

On May 25th, Multichain stated in a tweet that some cross-chain routing cannot be used due to force majeure, and the time for service restoration is unknown. After the service is restored, pending transactions will be automatically credited. Alfred Xu, co-founder of Multichain, stated in the Telegram community regarding the founder’s arrest by the police: “The team is working normally.”

d. Qian Dejun said that he cannot contact Multichain founder Zhaojun at present

On May 25th, Qian Dejun, founder of Fusion Foundation, stated that he cannot contact Multichain founder Zhaojun at present, “see if he can provide technical or other assistance, the most important thing is the safety of user assets and people.” Earlier, there had been disputes between the two parties over Multichain’s equity and control.

e. Andre Cronje: Fantom’s withdrawn MULTI has not been sold yet

On May 25th, Andre Cronje (AC) responded to yesterday’s withdrawal of funding by the Fantom Foundation from Multichain, stating that due to the uncertainty of Multichain, the foundation has stopped providing liquidity for its MULTI token on SushiSwap. “Liquidity providers are meaningless in times of uncertainty. It can be seen from on-chain data that the assets have not been sold yet. Once Multichain can issue a statement on this matter and resolve it, we will LP again.” At the same time, AC stated that assets on Fantom are protected by a multi-party calculation protocol and that the Fantom bridge is not affected.

DeFiLlama data shows that the on-chain liquidity of Multichain Token MULTI plummeted 90% from about $6.5 million on May 23rd to about $667,000 today.

f. Binance suspends deposits of bridged token networks for Multichain

On May 25th, Binance announced that it will suspend deposits of the following bridged token networks while waiting for a clear explanation from the Multichain team: POLS-BSC, ACH-BSC, BIFI-FTM, SUPER-BSC, AVA-ETH, SPELL-AVAXC, ALBlockingCA-FTM, FTM-ETH, FARM-BSC, DEXE-BSC. Deposits of these assets on other networks remain open.

g. In Multichain’s $1.76 billion Total Value Locked (TVL), the Fantom network has the highest share at 36.7%.

On May 26th, according to Multichain Explorer, the Fantom network has the highest share in Multichain’s $1.76 billion TVL, reaching 36.7% ($645.67 million). Excluding the native token FTM, there are about $1.66 billion worth of assets on the Fantom network, and nearly 40% of the assets are Multichain’s wrapped assets. The major stablecoins on Fantom, 191 million USDC and 82 million USDT, are mainly issued by Multichain. It is worth noting that Multichain is Fantom’s official cross-chain bridge, and thus has a large exposure. According to the browser status, most chains, including Fantom, are running normally, and mainstream assets are still flowing in and out of Fantom. There is no sign of decoupling between USDC and USDT on Fantom.

4. Three U.S. presidential candidates expressed their support for Bitcoin.

a. Kennedy announced that he will become the first U.S. presidential candidate to accept Bitcoin campaign donations.

Robert Kennedy Jr. stated at the Bitcoin 2023 Conference that he will become the first U.S. presidential candidate to accept Bitcoin campaign donations, praising cryptocurrencies as “symbols of democracy and freedom”. In a tweet on May 3rd, Kennedy also stated that “cryptographic technology is an important innovation engine” and added that the United States is hindering the development of this industry and is driving innovation elsewhere. Kennedy is currently a Democratic candidate for president and is the nephew of the 35th President of the United States, John F. Kennedy. He has received support from about 14% of Democratic primary voters, compared to Biden’s support rate of about 50% within the Democratic Party.

b. U.S. Republican presidential candidate Vivek Ramaswamy announced that he will accept Bitcoin donations.

On May 21st, U.S. Republican presidential candidate Vivek Ramaswamy announced that he will accept Bitcoin donations, becoming the second presidential candidate to formally accept Bitcoin campaign donations after Robert Kennedy Jr. Ramaswamy chose BitBlockingy’s payment service to accept Bitcoin donations, with a maximum of $6,600 in donations and an NFT available for collection after donation. In the recent YouGov poll, Vivek Ramaswamy’s support rate is only around 4%.

c. Florida Governor Ron DeSantis says he will protect Bitcoin if elected president

On the evening of May 24th, Florida Governor Ron DeSantis launched his presidential campaign with Elon Musk on Twitter Spaces, stating that if he is elected next year, he will protect Bitcoin and oppose any form of ban on cryptocurrencies. NBC’s primary poll shows that DeSantis has a 31% approval rating among Republicans, less than Trump’s 46%.

5. Cryptocurrency trading platform Hotbit announced that it will stop operations

On May 22, cryptocurrency trading platform Hotbit announced that it will stop all CEX operations starting at 12:00 on May 22, and users must withdraw all remaining assets before June 21. Hotbit believes that the reasons for its closure include: 1. Continuous outflow of user funds and other deteriorating operating conditions; 2. CEX is becoming more cumbersome, with highly complex and interrelated businesses that are difficult to comply with whether they are regulated or decentralized; 3. The operation mode of diversified assets is unsustainable. Hotbit announced in August 2022 that it would suspend trading, deposit, and withdrawal functions because its former managers participated in a project that led to several high-level executives of the team being summoned by law enforcement agencies and some of Hotbit’s funds being frozen.

6. Binance Weekly Recap

a. Binance has successfully dismissed a lawsuit filed by Divya Gadasalli in Texas

According to Bloomberg, Binance has successfully dismissed a lawsuit filed by Divya Gadasalli in Texas. Divya Gadasalli claimed that she was defrauded of $8 million in cryptocurrency by a man she met on Tinder. US District Judge Amos Mazzant ruled on Monday that Divya Gadasalli failed to provide “any facts about Binance’s actual participation in this case” and could not demonstrate that the court had jurisdiction over the cryptocurrency exchange. Although Binance is a foreign company with a US entity, Binance.US has been banned from operating in Texas, and the woman could not prove that any events that led to her fraud occurred in the state.

b. Binance NFT marketplace launches NFT loan function

On May 25th, Binance NFT Marketplace launched its NFT loan function, which currently supports BAYC, MAYC, Azuki, and Doodles. The loan interest rate is 7.91%, and the loan-to-value ratio ranges from 40% to 60%. As of May 26, 2023, BAYC, MAYC, and Doodles have displayed one to two loans.

c. BNB Chain is expected to undergo the Luban hard fork upgrade at block height 29,020,050, which is expected to arrive at 21:30 UTC on June 11. This upgrade includes three proposals: BEP-126 introduces the “Fast Finality” mechanism, which makes it impossible to reverse a block once it has been finalized on the network; BEP-174 proposes “cross-chain relay management” to mitigate any potential security issues in the BSC bridge; BEP-221 proposes the “CometBFT Light Block Validation” system, which suggests adding new contracts to blockchains using CometBFT technology.

d. Reuters: Binance Mixed Customer Funds and Company Revenue, Binance Responds to Report Lacking Evidence

On May 23, according to Reuters, three insiders revealed that Binance mixed customer funds and company revenue in 2020 and 2021, violating U.S. financial regulations requiring customer and company funds to be kept separate. One insider said the amount involved was in the billions of dollars, and this mixing occurred almost daily in the Silvergate Bank account of the exchange in the United States. Reuters could not independently verify the numbers or frequency, but the news agency reviewed a bank record showing that on February 10, 2021, Binance mixed a $20 million payment from its corporate account with a $15 million payment received from customer funds.

In response to Reuters’ report on mixing user funds, Binance CCO Blockingtrick Hillman tweeted that the basis of the entire Reuters report was that when users buy BUSD (Blockingxos) from Binance, they are taken to a trading page that displays the word “deposit.” Users are purchasing a stablecoin that can be exchanged for Blockingxos, which is clearly stated on the page. This report is so weak that Reuters had to write at the beginning, “Reuters found no evidence of Binance customer funds being lost or taken,” obviously to protect itself from defamation lawsuits. The report repeatedly mentions CZ’s ethnic background, which is obvious xenophobia.

7. OKX Weekly Update

a. OKX has applied for regulatory approval in France and will establish its European headquarters in Paris.

On May 23, according to Bloomberg, OKX has applied for regulatory approval in France and will establish its European headquarters in Paris. OKX registered in France in April and plans to recruit about 10 people in France in the next six months, reaching about 100 employees in France in the next three years. Paris and Dubai are also the dual headquarters of Binance.

b. The latest Web3 wallet APP version of OKX now supports sending, receiving, and trading of BRC20 assets

On May 23, OKX announced that its latest Web3 wallet APP version has supported the sending, receiving, and trading of BRC20 assets since 12:00 on the 23rd. OKX has previously launched ORDI on the exchange.

c. OKX announces that the latest APP program will allow Hong Kong users to buy, sell and hold 16 major cryptocurrencies

On May 25, OKX announced that the latest APP program will allow Hong Kong users to buy, sell and hold 16 major cryptocurrencies (BTC, ETH, ADA, MATIC, SOL, DOT, UNI, LINK, SAND, LTC, AVAX, AXS, ATOM, XLM, USDT, and USDC), and can be purchased with Hong Kong dollars, P2P, or through third-party providers such as AppleBlockingy, Visa and MasterCard. OKX previously announced that it has established a Hong Kong entity for its proposed license application in accordance with the new VASP regulation in Hong Kong, which will take effect on June 1.

Earlier, according to the Hong Kong Securities and Futures Commission, the minimum requirement for tokens provided to retail investors is to be included in two indices, one of which should cover cryptocurrencies included in traditional indices. Among them, BTC ETH LTC BCH DOT SOL ADA AVAX MATIC LINK is the most included in traditional indices. However, the index introduced by CoinDesk is relatively extensive, covering 28 cryptocurrencies. In addition, there are various classifications such as DeFi entertainment smart contract platform indices. In addition, the Hong Kong Securities and Futures Commission requires that tokens must have been launched for 12 months, so new tokens such as ARB cannot be listed.

It should be noted that OKX currently does not have a license. The Hong Kong SFC provides a one-year transition period for entities of already operating exchanges, and the above tokens should be listed by OKX according to the requirements of the Hong Kong SFC. They will be adjusted in accordance with regulatory requirements.

d. Xu Mingxing: Due to the sudden situation of SAMO, about 10 accounts hit the “suspected blacklisted risk control strategy”

On May 26th, OKX’s Xu Mingxing stated that due to sudden market conditions with SAMO, about 10 accounts were hit with a “risk control strategy that is suspected of being hacked”. This strategy temporarily freezes accounts, and customer service immediately contacts clients to verify if the operation is legitimate. At present, all frozen accounts have been unfrozen. This risk control strategy indeed has defects that caused this incident. The team is improving this risk control strategy. Due to CZ sharing the QR code of SAMO in a CCTV program, prices experienced violent fluctuations.

8. Doubts about misappropriation of assets and insolvency, WOO X responds that it is untrue and can be verified with public data

On May 23rd, Christopher Brunet published an investigation into WOO X, questioning the current financial health of the platform and suspecting that the platform has misappropriated user assets for investment, resulting in insolvency. The main arguments include: 1. The assets deposited for custody are less than the user assets; 2. WOO occupies a proportionally high amount of reserve assets; 3. WOO’s market-making institution can access user deposits without restriction.

WOO X responded to this by saying that: 1. User assets, apart from those saved for custody (80% share), are also dispersed on five different third-party platforms, and users can view specific amounts on other platforms and decide on risks themselves; 2. Users have pledged a lot of WOO on the platform, so the proportion is higher; 3. Kronos Research is a multi-strategy hedge fund that is limited to providing liquidity on WOO X instead of speculation, and WOO X will introduce more liquidity providers.

9. Cryptocurrency venture capital company Blockingradigm is expanding its focus to AI

On May 26th, cryptocurrency venture capital company Blockingradigm is expanding its focus to AI, now calling itself a “research-driven technology investment company” rather than one that specifically invests in “disruptive crypto/Web3 companies and protocols”. The content “We believe that cryptographic technology will define the next few decades” has been removed from its homepage. Insiders said that this change does not mean the company is avoiding cryptocurrency, but rather emphasizing its technical research. The company has not changed its mission and continues to focus on cryptocurrency and web3.

Blockingradigm is an investor in FTX and cancelled its $290 million investment in the company after it filed for bankruptcy in November. However, Blockingradigm is still considered one of the most influential and innovative VCs in the cryptocurrency industry. Blockingradigm raised a $2.5 billion fund in November 2021, the largest cryptocurrency fund at the time, with a portfolio including FTX, Uniswap, OpenSea, and Fireblocks.

10. Gemini: DCG has not paid its $630 million debt due on May 11

On May 22, Gemini stated that it is discussing with Genesis, DCG, and creditors to grant DCG an extension to avoid default on its $630 million debt due on May 11. However, if no agreement is reached, Gemini and other parties will propose a revised restructuring plan to Genesis that does not require DCG’s approval. Gemini is also preparing to file a claim demanding Genesis return over $1.1 billion in digital assets to its more than 200,000 Earn users.

Key Financing Events

  • Multicoin Capital led a $2.3 million seed financing round for FastLane Labs, the largest miner-extractable value (MEV) protocol for Polygon.

  • Dispersion Capital has raised a $40 million fund to invest in decentralized infrastructure. The fund, supported by institutions such as WeNade, Circle Ventures, Ripple, Alchemy Ventures, and NGC, will focus on deploying capital to pre-seed and seed rounds and has already deployed 10% of the fund.

  • QED Investors announced that its two funds have raised a total of $925 million, with one early-stage fund raising $650 million and the other early-growth fund raising $275 million. The new funds will support QED’s continued investment in the global payments, lending, and cryptocurrency space.

  • Tools for Humanity, the technology company behind Worldcoin founded by OpenAI CEO Sam Altman, raised $115 million in a Series C financing round led by Blockchain Capital with follow-on investments from a16z, among others.

  • Web3 gaming studio Metagame Industries announced a strategic financing round with a valuation of nearly $100 million. Participating institutions include Sui developer Mysten Labs, game publisher Funplus/Xterio Ecosystem Fund, investment company Big Brain Holdings, and 2moon Capital, among others.

For more industry financing events, please visit crypto-fundraising.info.

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