A leading Hong Kong cryptocurrency operator has pulled the plug on its business as the shockwaves from the collapse of FTX continue to reverberate throughout the industry.
Genesis Block, which at one time operated one of Asia’s biggest bitcoin ATM networks, said it would be closing down its over-the-counter trading portal on December 10, according to an email to customers sent by its compliance department reviewed by Reuters.
“We have ceased trading, as we don’t know which counterparties would fail next, so we would rather close out all our positions to regain some of our liquidity,” chief executive Wincent Hung said this week.
The company is also asking customers to withdraw their funds, the email shows, and will not accept new customers.
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Genesis Block has no connection with a separate crypto player called Genesis Global Capital which suspended customer redemptions this week.
Even before FTX’s bankruptcy, Genesis Block had been winding down its Hong Kong business, according to three people familiar with the situation, cutting ties with the failed exchange earlier this month.
One person with knowledge of the matter said one Genesis Block official was previously a director in FTX Hong Kong, but resigned from the directorship this month. FTX Hong Kong is one of the about 130 FTX-affiliated companies backed by Sam Bankman-Fried that have filed Chapter 11 bankrupcy proceedings in the United States.
The people declined to be identified because they were not authorised to speak to the press. Genesis Block executives declined to comment.
Genesis Block’s website still shows a guide to how to buy FTT, the native token of the failed exchange, using the ATM network, which spans 29 locations in Hong Kong and six in Taiwan.
The ATMs are now operated by a brand called CoinHero, which is expanding in Hong Kong after Genesis Block sold the business to a third party last year, according to the people with knowledge of the matter.
CoinHero’s website offers a guide for its customers on how to buy FTT through Genesis Block’s trading desk in Hong Kong.
CoinHero did not reply to Reuters’ request for comment. Genesis Block didn’t respond to questions on the ATM network.
Crypto’s Investor Protection Challenges
Genesis Block’s withdrawal from Hong Kong, ranked by market data provider Forex Suggest as one of the most “crypto-ready” cities in the world in terms of the number of ATM relative to its population, underlines the challenges in enforcing investor protection in the highly connected $900 billion crypto world.
In Hong Kong’s busy Causeway Bay shopping district, cryptocurrencies bitcoin, tether and dogecoin can be traded easily at both ATMs and trading desks.
Meanwhile the city’s Securities and Futures Commission (SFC) is currently consulting the industry on its proposal to allow retail trading of virtual assets in a move it hopes will bolster Hong Kong’s status as a fintech hub.
If adopted, such a move would represent a major relaxation of the city’s virtual asset services provider licensing regime, expected to become effective in March 2023. The SFC had initially proposed limiting trading to professional investors only.
- Reuters with additional editing by Sean O’Meara
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