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Hong Kong Expedites Crypto Approvals Post-JPEX Rugpull, Focusing On Compliance Boost

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In the wake of the recent JPEX Rugpull incident, OSL, a compliance-focused exchange in Hong Kong, disclosed that the local government had expedited the approval process for cryptocurrency products. This move aims to boost the compliant development of the industry, signaling a proactive stance following the shockwaves caused by the JPEX debacle.

Stricter Monitoring for Crypto Platforms

According to reports from local media, the JPEX incident stirred considerable controversy, prompting licensed virtual asset platform operators to anticipate faster approval timelines for new products. Financial technology solution providers noted that building future tokenized platforms in collaboration with banks could significantly enhance the virtual asset industry’s credibility in the public’s eyes.

BC Technology (0863), a subsidiary of OSL and a licensed virtual asset platform company in Hong Kong, revealed insights on the matter. Hu Zhenbang, the group’s Chief Financial Officer, emphasized that the government has consistently supported the licensed virtual asset industry, maintaining stringent regulatory oversight. Post-JPEX, Zhenbang observed an acceleration in product approvals, indicating a commitment to reinforcing compliance.

He commented:

Non-compliant platforms will face stricter monitoring in the aftermath of the JPEX incident. To avoid legal repercussions, these platforms will no longer be permitted to engage in extensive public promotion at MTR stations, as was common in the past.

Chen Yaowen, Chief Digital Director and Financial Technology Innovation Director of Sifang Innovative Hong Kong, a financial technology solution provider specializing in virtual asset tokenization, expressed optimism. He highlighted the pivotal role that banks could play in fostering the industry’s growth, particularly by integrating with tokenized platforms.

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Source: News.mingpao

Yaowen clarified that with the public’s trust in banks and oversight from the China Securities Regulatory Commission, banks can ensure compliant operations in the crypto industry. It would enable the public to seamlessly trade virtual assets on regulated platforms, with secure withdrawals and deposits, presenting banks with substantial opportunities in tokenized virtual assets and secure custody wallets.

Nevertheless, the collaboration between compliant platforms, government regulators, and established financial institutions is anticipated to drive the region’s ascent in the global virtual asset market.

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Bitcoin Integration & High Stakes: Hong Kong’s Resurgent Investment Immigration

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Hong Kong, renowned for its dynamic financial sector, has reignited its investment immigration program, which was dormant for eight years. This revival comes with a fresh twist as a local lawmaker suggests including Bitcoin purchases on Hong Kong’s licensed exchanges as part of the program. 

According to the report, the rebooted program has set the entry threshold at approximately US$3.84 million, clearly indicating Hong Kong’s determination to attract high-net-worth individuals. The government unveiled eight plans to entice family offices to bolster this initiative, including the “Capital Investor Entry Scheme.” While the details are pending release later this year, the entry threshold is expected to rise to NT$30 million, creating buzz among potential investors.

PricewaterhouseCoopers has been inundated with inquiries from clients eager to participate in the program, foreseeing considerable demand. The firm hopes to collaborate with the family office tax preferential system, potentially offering immigration packages to qualified family offices, making it easier for members and their immediate families to secure visas.

Despite the tax incentives, some legislators believe that political considerations have prompted wealthy businessmen to move their assets elsewhere, and even more generous discounts may not lure them back. Instead, they propose attracting family offices from the Middle East and other regions.

Notably, the revived program doesn’t permit investment in real estate, and mainlanders still need to be included in eligibility. Wang Zhiwei, a partner at PricewaterhouseCoopers, highlighted the anticipation surrounding the program’s return, emphasizing that Hong Kong’s low tax rate and absence of inheritance tax continue to be attractive to prospective tax residents.

Investment immigrants must wait seven years to obtain permanent residency, a rule that Wang Zhiwei believes is unlikely to change.

Tax Benefits & Bitcoin Integration

Chiu Ta-kan, a lawmaker from the technology and innovation sector, has called for the clarification of asset categories. He suggests classifying Bitcoin traded on licensed virtual asset exchanges as financial products, opening a new avenue for investors. While some argue that property purchases should also be eligible, Chiu Ta-kan maintains a neutral stance.

Expanding asset classes is another avenue for attracting family offices, with tax concessions being a key factor. Wang Xiaoyan, a tax partner at PricewaterhouseCoopers Hong Kong, hopes to broaden the range of assets like bitcoin and income eligible for tax incentives, recognizing that family offices seek diverse investment opportunities.

Despite Hong Kong’s efforts, Zeng Peilin, chairman of the Tsang Group, stressed the need for more attractive measures to compete with jurisdictions like Singapore and Dubai. He emphasizes that political and global factors are pivotal in attracting wealthy investors.

Qiu Dagen, another prominent figure, suggests that the Middle East should be the primary target for family offices. He believes that the region’s political considerations make it a ripe market for Hong Kong to tap into.

While the government aims to attract 200 family offices by the end of 2025, there must be official data on the number of family offices in Hong Kong. Zeng Peilin argues that increasing investments in the city is more crucial than focusing on the number of family offices, with 10-year investments continuing to be an attractive proposition for potential investors.

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Hong Kong’s Bitcoin ETF Ambitions Unveiled

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Hong Kong is actively considering the introduction of a spot Bitcoin exchange-traded fund [ETF] in its crypto market, aiming to enhance its status as an Asia-Pacific digital asset hub. As reported by Bloomberg, this move comes as the city grapples with the aftermath of the JPEX scandal, a major financial fraud that recently shook the crypto community. In this scandal, the unlicensed JPEX crypto exchange was allegedly involved in duping over 2,530 individuals, leading to losses of HK$1.56 billion. Hong Kong police arrested 28 people, including a prominent crypto influencer, in connection with the case.

Despite these challenges, Hong Kong remains optimistic about the potential of spot Bitcoin ETFs, viewing them as a means to bring digital assets into the mainstream crypto sector. The Securities and Futures Commission [SFC] of Hong Kong, under the leadership of Chief Executive Officer Julia Leung, is open to innovative proposals that enhance efficiency and customer experience. Leung emphasized that while they are willing to explore new avenues, they remain committed to addressing potential risks associated with these innovations.

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Hong Kong's Bitcoin ETF Ambitions Unveiled 3

Several leading asset management firms, including CSOP Asset Management, Samsung Asset Management, and Mirae Asset Global Investments, have submitted their ETF applications to the SFC. Once approved, Bitcoin and Ether futures are expected to be live on the Chicago Mercantile Exchange, according to insiders familiar with the plans.

Hong Kong’s Bitcoin Ascent

Hong Kong has actively pursued its position as a digital asset hub, rolling out a dedicated virtual asset regulatory framework in June. This initiative aims to restore the city’s reputation as a cutting-edge financial center. Recent developments include the expansion of UK-based Zodia Custody, a digital asset custodian supported by Standard Chartered, into Hong Kong. Zodia Custody’s CEO, Julian Sawyer, cited the substantial demand for crypto assets, particularly from institutional entities, as a driving factor behind their decision to expand into the region.

Hong Kong’s efforts align with those of other jurisdictions seeking to develop digital-asset hubs, including Singapore, Dubai, and the European Union. Meanwhile, the United States has taken a more restrictive approach, imposing stringent regulations on the industry. As the crypto industry slowly recovers from the previous year’s $1.5 trillion market crash, Hong Kong’s proactive initiatives underscore its commitment to becoming a prominent player in the evolving digital-asset landscape.

Hong Kong’s Crypto Renaissance: 5 Regulatory Innovations After JPEX Scandal

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In the wake of the recent $165 million scandal involving the crypto exchange JPEX, the Hong Kong government is doubling down on its commitment to foster the growth of the Web3 market. In a statement from Hong Kong Fintech Week, Christopher Hui, the Secretary for Financial Services and the Treasury, delivered a keynote address outlining the regulatory moves Hong Kong authorities are set to implement, reassuring stakeholders that the JPEX scandal will not deter their vision for the region’s digital future.

The JPEX scandal, in which 2,500 locals alleged they were defrauded by the Dubai-based exchange, prompted swift action from the Hong Kong authorities. The Securities and Futures Commission (SFC) warned that JPEX was promoting its services locally without a license, leading to a call for tighter crypto regulations in the region.

Hui emphasized that the government’s commitment to the Web3 market remains unwavering. He asserted,

“We’ve been asked many times whether JPEX will affect our determination to grow the Web3 market — the answer is a clear ‘no.'”

This determination is reflected in the multifaceted approach being taken by Hong Kong regulators.

Crypto Task Force Targets Illicit Exchanges

The SFC has set up a task force in collaboration with the police to combat illicit crypto exchange activities. Furthermore, the SFC will provide guidance on tokenized securities and the tokenization of SFC-authorized investment products, reinforcing its commitment to facilitating responsible innovation within the crypto space.

Notably, the scope of crypto regulation in Hong Kong will expand beyond regulated trading platforms to cover all buying and selling activities, ensuring a comprehensive and robust framework.

A highly anticipated joint consultation on stablecoins by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau is on the horizon. This initiative will solicit feedback on a January discussion paper and is expected to have a significant impact on the regulatory landscape.

Hui also revealed that the HKMA will engage with the sector to provide guidance on banks offering digital asset custodial services, signaling the growing involvement of traditional financial institutions in the crypto space.

In conclusion, the JPEX scandal may have exposed vulnerabilities in Hong Kong’s crypto sector, but it has not shaken the government’s determination to foster a thriving Web3 market. The regulatory moves outlined by Christopher Hui demonstrate Hong Kong’s resilience and commitment to nurturing responsible growth in the crypto industry, ensuring that it remains an attractive destination for blockchain and digital asset innovation.

Standard Chartered’s Crypto Venture Expands To Hong Kong

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UK-based Zodia Custody, a digital asset custodian supported by Standard Chartered, has recently extended its services to Hong Kong, marking a significant expansion in the Asia-Pacific region, according to a CNBC report. Established in 2020, Zodia Custody specializes in providing secure investment opportunities in cryptocurrencies, primarily catering to institutional clients such as corporations and professional investors.

The decision to expand into Hong Kong was driven by the substantial demand for crypto assets, especially from institutional entities rather than individual retail customers, as per Julian Sawyer, Zodia’s CEO.

The Hong Kong government and the regulators see digital assets as the future and also want Hong Kong to be a hub. What we’re seeing is there are absolutely clients in all of those four markets who want to do things. We also see a lot of other clients and prospects outside those four jurisdictions that want to come in on the institutional side.

Hong Kong’s robust market appetite for cryptocurrencies, coupled with a progressive stance from the government and regulators, made it an ideal destination for Zodia’s expansion efforts. The Hong Kong authorities view digital assets as integral to the future financial landscape and are keen on establishing the city as a hub for such innovations.

Standard Chartered
Standard Chartered's Crypto Venture Expands To Hong Kong 5

Zodia Custody’s expansion into Hong Kong is part of its proactive approach in the Asia-Pacific region. In recent months, the company has extended its services to countries such as Japan, Singapore, and Australia. Importantly, Zodia Custody is not undertaking this expansion journey alone; it has formed strategic partnerships with well-established institutions like Standard Chartered, Northern Trust, and Japan’s SBI Holdings.

This expansion aligns with the backdrop of Hong Kong’s banking regulator urging major financial institutions, including HSBC and Standard Chartered, to consider embracing cryptocurrency exchanges as their clients. Although Hong Kong’s banks have not imposed outright bans on crypto clients, their cautious approach stems from concerns about potential legal consequences if these platforms are linked to money laundering or illicit activities.

Standard Chartered Under Regulatory Spotlight

Standard Chartered, being a significant player in Hong Kong, holds key positions as issuers of the city’s currency and within the Hong Kong Association of Banks lobby group. A spokesperson from Standard Chartered emphasized the bank’s ongoing dialogues with regulators on various topics.

Concurrently, Zodia Custody is engaging in discussions with both the Securities and Futures Commission [SFC] and the Hong Kong Monetary Authority to ensure regulatory compliance within the financial district. This signifies Zodia Custody’s dedication to operating within the bounds of regulations and maintaining a compliant business approach.

Crypto Sentiments In Hong Kong: 41% Shy Away Following JPEX Scandal

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Public sentiment towards crypto in Hong Kong has taken a nosedive in the wake of the JPEX crypto exchange scandal, according to the initial findings of a comprehensive survey conducted by The Hong Kong University of Science and Technology’s business school. The research sought to gauge the scandal’s impact on public attitudes toward virtual assets (VAs).

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Crypto Sentiments In Hong Kong: 41% Shy Away Following JPEX Scandal 7

The survey revealed that a staggering 41% of respondents in Hong Kong now prefer not to hold VAs, marking a significant increase of 12 percentage points since a previous survey conducted before the JPEX scandal. The study, conducted in two phases, has tracked public sentiments regarding VA investments, intentions, and regulatory safeguards.

In this latest round of findings, approximately 20% of respondents expressed a desire to hold VAs in the future, a notable decrease of five percentage points compared to data collected before the financial incident.

With 84% of respondents confirming their awareness of virtual assets, recent events have triggered greater interest in regulatory issues and a more cautious investment approach. Associate Dean of the HKUST Business School, Prof. Allen Huang, emphasized that while VAs have the potential to drive financial sector innovation, they also pose significant risks and challenges for investors and regulators.

The survey also highlighted the media sources respondents rely on for information about VAs. “Other online resources” such as websites, blogs, podcasts, and videos were deemed the most important by 23% of respondents, closely followed by social media (21%) and traditional media like newspapers, magazines, and television (18%).

Prefer To Invest In Crypto

Regarding investment preferences, 61% of respondents identified crypto exchanges as their preferred medium for holding VAs. Among the various types of VAs, Bitcoin emerged as the top choice for 73% of respondents, followed by NFTs (24%) and Ether (21%).

Interestingly, most willing to invest in VAs plan to invest HK$50,000 or less. Respondents also preferred directly owning tokens and investing in ETFs over investing in VA derivatives or companies operating in the crypto space.

Furthermore, approximately 57% of respondents in the second-phase survey are aware of Hong Kong’s regulatory requirement for VA asset service providers, including crypto exchanges, to obtain licenses for operation, indicating a significant increase of 15 percentage points compared to the first-phase survey.

Despite the increase in regulatory awareness, there is still a common misconception among over half of the respondents that virtual assets traded on HK-licensed exchanges are approved by regulators.

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Meitu’s Crypto Adventure: From Bitcoin & Ether To AI and Global Expansion

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Meitu, a Hong Kong-listed company, has made headlines by becoming one of the first companies in the region to invest heavily in cryptocurrencies, particularly Bitcoin and Ethereum, to the tune of approximately $100 million. However, Meitu is now shifting its focus away from the volatile world of cryptocurrency and may consider selling its holdings at an opportune time.

The company’s recent success can be attributed to its subscription system, which has helped it turn losses into profits. Kang Yicong, senior investor relations manager at Meitu, emphasized the role of the subscription system in stabilizing earnings amidst macroeconomic uncertainties. Additionally, Meitu’s expansion into the booming AI business has been a significant growth driver, boosting subscriptions and contributing to profits.

Meitu’s foray into the world of cryptocurrency raised eyebrows, but Kang Yicong clarified that the company is open to selling its digital assets at the right moment. The market’s recent resurgence has been a boon for Meitu, reversing some of the losses it previously incurred due to bearish cryptocurrency markets.

In 2023, Meitu is capitalizing on the global AI craze, launching the enterprise AI vision solution “MiracleVision 3.0.” Kang Yicong highlighted AI’s pivotal role in driving the company’s growth, particularly in converting subscribers. Meitu is also looking to expand its corporate customer base and is introducing innovative solutions like “Beauty Industry” to cater to merchant and consumer needs.

While Meitu’s cryptocurrency investments have been a point of discussion, Kang Yicong affirmed that the company currently has no specific plans for disposal. Meitu’s future plans include a global perspective, focusing on Southeast Asia, Japan, South Korea, Europe, and the United States. The company aims to repackage its successful Chinese products for overseas markets.

Hong Kong’s Retail Crypto Investors 

In the broader context of Hong Kong, a recent report by the Investor and Financial Education Council (IFEC) revealed that 47% of retail crypto investors in the region are aware of the Virtual Asset Trading Platform Regulatory Regime. The report also highlighted a significant increase in crypto investments among adults aged 18-29, with 25% having invested in the past year, driven by the desire for short-term profits and the fear of missing out.

Despite this growing interest in crypto, stocks remain the preferred investment choice for most Hong Kongers, with 96% favoring them. Mutual funds, trusts, and bonds also feature prominently in investment preferences, emphasizing the importance of financial literacy and rational decision-making in the virtual asset investment landscape.

Crypto Services by SEBA Bank Approved for Launch in Hong Kong

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The Hong Kong sector of SEBA Bank, a Swiss financial institution supportive of cryptocurrencies, has received initial endorsement from the Hong Kong Securities and Futures Commission (SFC). This authorization allows the bank to participate in transactions involving digital assets. On August 30, SEBA announced that its recent license empowers the bank to provide crypto services, including over-the-counter derivatives, guidance on virtual assets, and the management of assets for discretionary accounts that encompass both digital assets and traditional securities.

It’s important to note that the Hong Kong division won’t possess the capability to convert between fiat currencies and cryptocurrencies. However, it can direct clients to its headquarters in Zug, which possesses the necessary license for such conversions.

Hong Kong has become the third market where SEBA has pursued a licensing process, following its activities in Switzerland and Abu Dhabi. With this preliminary approval in place, SEBA is now preparing for its operations once the official license is secured. Amy Yu, CEO of the Asia Pacific region at SEBA Bank, foresees that the official approvals will be granted by the conclusion of 2023. Regarding their expansion into Hong Kong, she further remarked, “We initially focused on Hong Kong as our starting point, given that it’s the first jurisdiction in the region. However, we are also exploring opportunities in Singapore.”

Exploring Hong Kong’s Potential as a Crypto Powerhouse

SEBA Bank’s most recent approval coincides with a series of regulated developments in the crypto space occurring within Hong Kong. Notably, HashKey, a cryptocurrency exchange, secured regulatory clearance as the first of its kind in the region. It’s important to highlight that HashKey and SEBA had previously joined forces in 2022 with the aim of fostering institutional adoption of cryptocurrencies.

While various companies are turning their attention to the region, SEBA’s participation stands out. According to Yu, SEBA’s decision was motivated by the expressed demand from crypto companies. These entities have been grappling with challenges in effectively managing and accessing their digital asset holdings through conventional channels. Additionally, considerable interest has emerged from private wealth and family offices. Yu elaborated, stating, “Crypto firms typically lack strong connections with traditional financial market providers. We are well-equipped to engage with these types of clients.”

Crypto Firms Alert: Hong Kong Watchdogs Flag Concerns

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In a move signaling growing concerns over the proliferation of cryptocurrencies and their associated risks, Hong Kong’s financial watchdog has issued a stark warning to digital asset firms operating within its jurisdiction. The Hong Kong Securities and Futures Commission (SFC) recently released a statement emphasizing the need for compliance with existing regulatory frameworks and heightened diligence in the virtual asset sector.

As the popularity of digital assets continues to surge, governments and financial regulators worldwide are grappling with the challenge of creating effective regulatory frameworks to ensure investor protection and financial stability. Hong Kong, known for its bustling financial landscape, has taken a proactive stance in addressing the digital asset industry’s potential pitfalls.

The SFC’s warning underscores its commitment to safeguarding the interests of investors and maintaining market integrity. The statement highlights the risks associated with initial coin offerings (ICOs) and digital asset trading platforms. The regulatory authority reminds crypto firms of the importance of obtaining the necessary licenses and adhering to anti-money laundering (AML) and counter-terrorist financing (CTF) obligations.

While innovation and technological advancements are welcome, the SFC emphasizes that these should not come at the expense of regulatory compliance. The crypto industry’s rapid evolution has led to concerns about its susceptibility to fraudulent activities and illicit financial practices. By reminding crypto firms of their responsibilities, the SFC aims to strike a balance between fostering innovation and protecting investors.

This move comes amid a broader global trend of regulatory agencies tightening their grip on the virtual asset sector. Countries like the United States, the United Kingdom, and Japan have already implemented stringent regulations to curb potential risks. Hong Kong’s warning signals its intention to align with these international efforts and contribute to the global drive for a safer crypto landscape.

Regulatory Compliance: Key to Responsible Crypto Growth

The SFC’s cautionary note also serves as a reminder to investors to exercise caution and perform due diligence before engaging with digital asset-related activities. As the industry remains nascent and largely unregulated, investors should be vigilant and avoid falling victim to fraudulent schemes that promise unrealistically high returns.

Furthermore, the Hong Kong Financial Watchdog’s recent warning to virtual asset firms is a significant step toward ensuring a secure and transparent crypto environment. By advocating for regulatory compliance and emphasizing the importance of investor protection, Hong Kong’s regulatory authority is setting a precedent for responsible crypto industry growth. As the global regulatory landscape continues to evolve, collaboration between regulators, crypto firms, and investors will be pivotal in shaping the future of cryptocurrencies.

Hong Kong Central Bank Joins Forces With Saudi Arabia Amid UAE’s Crypto Surge

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Hong Kong Monetary Authority (HKMA) and Saudi Central Bank (SAMA) Forge Momentous Financial Collaboration with MoU. Following a Successful Partnership with UAE Central Bank, HKMA Aims for Enhanced Financial Services and Innovations

The Saudi Central Bank (SAMA) and the Hong Kong Monetary Authority (HKMA) convened on July 26 for a bilateral meeting to enhance the integration of financial services between their respective nations.

During the meeting, the HKMA and the SAMA addressed various initiatives, including financial infrastructure advancement, open market operations, market connectivity, and sustainable development. Additionally, the central banks formalized their commitment to fostering collaborative discussions on financial innovation by signing a memorandum of understanding (MoU).

As per an official joint statement, HK and Saudi Arabia authorities also utilized the occasion to exchange knowledge and expertise in various domains, including tokenization, payment infrastructure, and supervision technologies.

According to Eddie Yue, who serves as the Chief Executive of the HKMA:

The MoU, in particular, will further enhance mutual cooperation as well as exchange of information and expertise between the SAMA and the HKMA in financial innovation and Fintech. We look forward to working with the SAMA to promote investment and financial market connectivity between the Middle East and Asia.

Hong Kong Emerges As Leading Crypto Hub With Pro-Crypto Regulation

Recently, Hong Kong has been determined to establish itself as a prominent global crypto hub. To this end, the region has unveiled a comprehensive crypto licensing regime and virtual asset regulations designed to attract and nurture crypto-related businesses. The pro-crypto regulatory environment has proven highly appealing, leading numerous crypto exchanges and firms to seek licenses in HK, driven by the escalating demand for digital assets.

Hong Kong is actively engaged in multiple cross-border tokenization projects. In mid-June, BOCI, the investment bank subsidiary of the Bank of China, launched a $28 million tokenized security within Hong Kong. The tokens were created on the Ethereum blockchain, utilizing Goldman Sachs’ tokenization protocol GS DAP, with each token representing a claim on the Hong Kong dollar.

The collaboration between Hong Kong and Saudi Arabia marks a pivotal moment in strengthening financial ties and fostering innovation in the financial sector. As this partnership unfolds, it is expected to have far-reaching implications, not only regionally but also on the global economic stage.

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