Tag: South Korea

South Korea Targets Crypto Major Shareholders with Proposed Financial Law Amendment

by Blockchain News

Key Takeaways

South Korean lawmaker Yoon Chang-hyun proposes an amendment to scrutinize the criminal records of major shareholders in crypto businesses.

The Financial Intelligence Unit (FIU) is also focusing on the eligibility of major shareholders.

The amendment aims to bring transparency and regulatory compliance to the crypto market.

Legislative Intent

On September 15, Yoon Chang-hyun, a lawmaker from the People Power Party, proposed an amendment to the Special Financial Information Law (특금법). The amendment aims to scrutinize not just the CEOs and registered executives but also the major shareholders’ criminal records during the application and review process for crypto businesses, according to decenter.

Regulatory Focus

The Financial Intelligence Unit (FIU) has also formed a Task Force (TF) to revise the requirements for crypto exchange reporting and will focus on the eligibility of major shareholders. An official from Yoon Chang-hyun’s office stated, “We have consulted with financial authorities and initiated the bill.”

Legal Risks and Implications

The proposal comes against the backdrop of legal risks involving major shareholders in crypto exchanges. For instance, Song Chi-hyung, the chairman of Dunamu (operator of Upbit), is awaiting a Supreme Court trial for allegations of creating fake accounts and manipulating transactions. Similarly, Lee Sang-jun, the CEO of Bithumb Holdings, is under investigation for receiving ‘listing fees’ from Kang Jong-hyun, who is suspected of being the real owner of Bithumb.

Compliance Requirements

If the amendment is enacted, existing crypto businesses will have to report details about their major shareholders within three months. Those found guilty post-enactment will likely be disqualified during the review process. The law will not be retroactive but will require crypto businesses to renew their reporting every three years.

Conclusion

The proposed amendment reflects the legislative intent to integrate the often-volatile crypto market into the regulatory framework. The focus on major shareholders’ eligibility aims to bring a level of transparency and trustworthiness akin to traditional finance.

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Crypto Lending Firm Delio Faces Regulatory Sanctions for Compliance Failures in South Korea

by Blockchain News

Delio, a South Korean crypto asset management firm holding dual licenses as a Virtual Asset Service Provider (VASP) in Korea and a Money Services Business (MSB) in the U.S., has been hit with a three-month business suspension and a fine of KRW 1.896 billion (approximately $1.6 million USD) by the Financial Services Commission’s Financial Intelligence Unit (FIU). The regulatory body announced the punitive measures on September 1, citing multiple violations of financial transaction laws.

Regulatory Scrutiny

The FIU stated that Delio failed to comply with various obligations under the Act on Reporting and Using Specified Financial Transaction Information. Specifically, the firm neglected to report transactions with unregistered virtual asset service providers (VASPs), failed to assess money laundering risks before launching new products and services, and did not fulfill customer verification requirements. According to the FIU, “Delio supported the transfer of customer assets to unreported foreign virtual asset service providers 171 times and also supported the storage activities of these unreported VASPs.”

Operational Impact

Despite its regulatory credentials, Delio recently halted customer withdrawals, raising questions about its operational integrity. The company had been offering virtual asset deposit services with annual interest rates of up to 10.7%. However, the firm abruptly halted customer withdrawals in June, prompting an investigation by the FIU and subsequent legal action.

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SEC Collaborates with South Korea in Probing Terraform Labs and Do Kwon

by Blockchain News

The U.S. Securities and Exchange Commission (SEC) has secured approval to collaborate with South Korea in its probe against Terraform Labs and its co-founders, Daniel Shin and Do Kwon. This decision, sanctioned by District Judge Jed Rakoff on August 16, allows the SEC to question Shin and access documents from Chai Corporation, a Seoul-based payments provider he founded.

Shin and Kwon co-founded Chai in 2019, initially operating closely with Terraform. By 2020, the companies had diverged. The SEC’s investigation focuses on Chai’s use of the Terra blockchain and its relationship statements with Terraform. The reasons behind Chai’s separation from Terraform are also under scrutiny.

While Terraform Labs and Kwon didn’t oppose the SEC’s motion, they presented their own queries and have previously refuted the SEC’s claims. Accusations suggest that they falsely stated Chai’s use of the Terra blockchain for transactions.

In May 2022, the Terra cryptocurrency ecosystem experienced a staggering $40 billion loss, causing its token, LUNA, to plummet nearly to zero and triggering a broader market crash. Subsequently, the LUNA token split into two distinct entities: LUNA and LUNA Classic (LUNC). South Korean prosecutors have since charged Shin with fraud, accusing him of hiding the risks associated with investing in Terraform’s cryptocurrency.

On February 16, 2023, the U.S. Securities and Exchange Commission (SEC) charged Singapore-based Terraform Labs and its CEO, Do Hyeong Kwon, with conducting a multi-billion dollar crypto fraud from April 2018 to May 2022. The scheme involved various unregistered crypto asset securities, including “mAssets” and the Terra USD (UST) stablecoin. The SEC alleges that Terraform and Kwon falsely marketed these assets, promising high returns and misleading investors about their stability and usage. In May 2022, the value of these tokens crashed. The SEC emphasizes the importance of transparency and adherence to securities laws in the crypto sector.

Kwon is currently jailed in Montenegro for trying to exit using a fake Costa Rican passport, resulting in a three-month sentence. He faces investigations in both the U.S. and South Korea, beyond the SEC’s complaint.

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South Korea Advances CBDC Pilot Project: Jeju, Busan, and Incheon Selected as Test Regions

by Blockchain News

South Korea is advancing its efforts to implement a central bank digital currency (CBDC) by narrowing down three potential regions for a pilot project. The Bank of Korea has identified Jeju, Busan, and Incheon as candidates for the private target CBDC test bed, excluding the country’s capital, Seoul, according to a report from a local South Korean media outlet on July 31, 2023.

The pilot project aims to explore the issuance and distribution of the CBDC, and the Bank of Korea plans to select one of the aforementioned regions for experimentation. The process will include testing payments and distribution at a public level and securing franchises that can accept payments via CBDC. An official at the bank stated, “The CBDC electronic wallet app will allow not only local residents but also many civilians, such as tourists to [partake].”

The regional closed tests of the CBDC will be similar to the current local currency scheme in place in various regions of South Korea. This local currency scheme was introduced during the COVID-19 pandemic as a basic income and relief payment solution. Jeju, Busan, and Incheon currently issue and distribute their local currencies, known as “Tamranjeon,” “Dongbaekjeon,” and “Incheon e-Eum,” respectively.

An official from a commercial bank in Korea reported that the choice was greatly inclined to Jeju, which has the second-largest population, as the number of eligible citizens in Busan is “so large that the Bank of Korea is burdened in many ways.”

The CBDC initiative in South Korea has been part of a broader exploration in recent years, with the country working on the project since at least 2020. Multiple banks in South Korea have also released information that they are conducting research on stablecoins as CBDC alternatives for efficiency purposes.

The local currency scheme has fewer technical barriers to overcome compared to CBDCs, according to the report. The pilot project’s success could pave the way for a more comprehensive implementation of CBDCs in South Korea, aligning with global trends in digital currency development.

Previously, South Korean electronics giant Samsung has joined forces with the Bank of Korea to cooperate on new CBDC research, including offline CBDC payment technology. This collaboration aims to enhance payment security and explore innovative solutions for digital currency utilization.

The South Korean CBDC pilot project represents a significant step in the country’s digital currency evolution and reflects the growing interest in CBDCs worldwide. 

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South Korea Embraces Blockchain: New Digital Asset Act, K-Culture Tokenization, and More

by Blockchain News

According to the Polymesh report titled “Regulatory Developments in Digital Assets”, South Korea has made a significant move in the crypto industry by passing the “Digital Asset Basic Act” (DABA). This Act introduces 17 legislative proposals aimed at balancing blockchain development with investor protection.

The Act, which is expected to be implemented into law in June 2024, includes measures such as capital reserve requirements for exchanges and the establishment of a separate market for digital securities.

Shinhan Bank, the nation’s oldest bank, has also become an equity investor in the Korea Digital Asset Custody Co. (KDAC), a consortium for startups providing digital asset custody solutions. Shinhan Securities Co., Ltd, part of the Shinhan Financial Group, has launched its “STO Alliance”, a consultative body for the development of security tokens. 

However, the path to digital asset regulation in South Korea hasn’t been without resistance. The Financial Services Commission (FSC) and the Bank of Korea (BoK) have been in a dispute over regulatory supremacy for digital assets. The BoK has demanded a right to access data from digital asset service providers, arguing that digital assets may pose a threat to financial stability.

South Korea’s only legislation to explicitly define and regulate digital assets is an amendment bringing digital assets within the scope of the Act on Reporting and Use of Specified Financial Information, known as the “Anti-Money Laundering Act.”

In a unique blend of culture and technology, South Korea is planning to use blockchain technology to spread its popular culture, known as “K-culture”. The city of Busan plans to roll out a city-backed decentralized digital commodities exchange that will focus on tokenized products that take advantage of the city’s cultural strengths.

In related news, Cube Entertainment, the fifth-largest K-pop company, has moved into the metaverse via a partnership with Animoca Brand’s gaming subsidiary The Sandbox. The partnership will see Cube creating a “K-culture complex” filled with Korean cultural content on virtual land in The Sandbox.

Finally, global digital asset custodian BDACS has announced its intention to establish a project for the tokenization of Korean culture built on the Polymesh blockchain. This move aims to unlock new engagement for fans, artists, producers, and investors.

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South Korea’s FSC to Submit Two Crypto-Related Acts to National Assembly

by Blockchain News

According to Newsis on July 13, the People’s Power Party and the Financial Services Commission of South Korea are planning to submit amendments to the Electronic Securities Act and the Capital Market Act to the National Assembly within this month. The amendments aim to institutionalize token securities. Representative Yoon Chang-hyun of the People’s Power Party, a member of the Political Affairs Committee, will lead the proposal.

Token Securities are securities issued in token form using blockchain technology. They enable the trading of various rights that were difficult to issue as traditional electronic securities. Theoretically, all assets, including commercial buildings, artworks, luxury goods, and intellectual property rights (IP), can be tokenized. This is why the securities industry anticipates new innovative businesses utilizing ST.

In preparation for the legislation, the Policy Committee, Political Affairs Committee, and the Special Committee on Digital Assets of the People’s Power Party will hold a public hearing at 10 a.m. today. The hearing will discuss the legislation that has been prepared so far, under the title “Venture Start-up Energy UP STO (Security Token Offering)”.

The upcoming legislation is expected to reflect the ‘Token Securities Issuance and Distribution Regulation System Improvement Plan’ announced by the Financial Services Commission in February. The improvement plan includes amending the Capital Market Act and the Electronic Securities Act to enable the issuance of token securities and establishing new account management institutions and over-the-counter trading brokerage businesses related to issuance and distribution.

Furthermore, on July 11, the Financial Services Commission (FSC) unveiled a new legislation mandating all companies that issue or manage cryptocurrencies, such as Bitcoin and Ethereum, to reveal their holdings. The objective of this bill is to augment transparency in the accounting and disclosure of crypto assets, adhering to supervisory guidelines that necessitate the accounting of every transaction involving cryptocurrencies.

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Korean Prosecution Investigates Cypto Coin WEMIX Issuer WeMade and Hyperism Simultaneously

by Blockchain News

The Korean prosecution has simultaneously raided WeMade, the issuer of the cryptocurrency WEMIX, and Hyperism, the asset management company responsible for WEMIX’s market making. This incident comes right after South Korea’s parliament passed the Virtual Asset Protection Act, which aims to crack down on illegal illegal trading practices such as market price manipulation and insider trading.

The raid was conducted at the headquarters of Hyperism, located in Gwanak-gu, Seoul. An official from Hyperism confirmed that the prosecution was conducting a search in relation to WEMIX. The office was tightly sealed, with both the front glass door and the external iron door firmly closed.

The Financial Investigation Department 1 of the Seoul Southern District Prosecutor’s Office initiated the search at WeMade’s headquarters in Bundang-gu, Seongnam-si, Gyeonggi-do. The investigation also extended to the market makers of WEMIX.

Previously, WEMIX investors had filed a complaint against Hyun-guk Jang, the representative of WeMade, accusing him of fraud and fraudulent unfair trading under the Capital Market Act on May 12.

In 2021, WeMade had invested in Hyperism through its blockchain-specialized subsidiary, WeMade Tree. It was reported that WeMade had invested KRW 5.2 billion from the funds raised from the sale of WEMIX, and subsequently paid 18 million WEMIX to the Hyperism Eco Fund.

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South Korea’s Crypto Protection Law Advances in Assembly

by Blockchain News

In a landmark move for South Korea’s cryptocurrency sector, the Cryptocurrency User Protection Act (also known as the Cryptocurrency Investor Protection Law) has successfully passed through the Legal Affairs Committee, marking a momentous milestone in the legislative process for digital assets.

Coming in the wake of the May 11 verdict by the Political Affairs Committee, the swift and unanimous passage of the Cryptocurrency Investor Protection Law through the Legal Affairs Committee on June 29 has crossed what is often referred to as the ‘ninth part of a steep hill’ in the law-making process. This progress suggests a strong likelihood of the law being passed in the National Assembly’s plenary session, given the absence of partisan disagreement.

If enacted, this legislation will be the first comprehensive law related to cryptocurrencies since the Specific Financial Transaction Information Act. The legislation aims to provide a clear and secure framework for investors in digital assets, addressing their protection and rights within the burgeoning cryptocurrency sector.

The progression of this law through the legislative process signifies a crucial step forward for the virtual asset (cryptocurrency) industry. Its potential enactment in the National Assembly underpins a growing recognition of digital currencies and the need for regulatory measures to ensure their safe and secure use.

The meeting at the main National Assembly building in Yeouido, Seoul, highlighted the importance of this law for the protection of cryptocurrency users, a fact that is being closely watched by investors and industry insiders alike.

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South Korea Grants Central Bank More Power Over Crypto

by Blockchain News

The Bank of Korea (BoK) has been granted increased power to investigate cryptocurrency service providers and issuers, as discussions on virtual asset legislation continue in South Korea. According to a report by The Korea Herald, the BoK will now have the right to scrutinize cryptocurrency-related businesses and request transaction data from digital currency operators.

The BoK has been in competition with the country’s financial regulator, the Financial Services Commission (FSC), over who should govern the regulation of the digital asset sector. While the BoK has expressed concerns over the financial stability risks associated with stablecoins, the FSC has warned that if the central bank governs crypto, it will send the message that digital assets have the same standing as traditional finance.

Despite the ongoing debate, the BoK’s right to request data from crypto exchanges has been confirmed by an official from the National Assembly’s Political Affairs Committee. The FSC will express its official position at a subcommittee meeting on April 25, which is expected to accelerate the rollout of South Korea’s virtual asset laws.

The South Korean government has been trying to push forward crypto legislation, but there have been arguments between the central bank and the FSC over who should control it. Democratic Party lawmaker Kim Han-gyu, who proposed the Crypto Assets Act, said that while the FSC admits it is necessary for the BoK to have the right to request data, it is refusing to include it in the bill.

The latest development means that both the South Korean central bank and its financial regulator will have increased power to investigate crypto operators and have full access to transaction data. This move follows several years of disagreement between the two institutions over crypto regulations.

The FSC has been active recently with enforcement actions against crypto companies and takes the same position as the United States Securities and Exchange Commission in that it considers crypto assets securities. South Korea’s Financial Supervisory Service, which operates under the FSC, announced the creation of an investigative body called the Digital Assets Committee in mid-2022.

In conclusion, the South Korean government is continuing its efforts to regulate the cryptocurrency sector. The Bank of Korea has been granted more power to investigate cryptocurrency-related businesses, and the Financial Services Commission is expected to accelerate the rollout of South Korea’s virtual asset laws. Despite disagreements between the two institutions, both will now have full access to transaction data and be able to investigate crypto operators.

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Asia Crucial to Web3 Gaming Industry

by Blockchain News

According to a recent report by DappRadar, Asia is a crucial region for the Web3 gaming industry, given its majority share of gamers and gaming revenue, as well as its high interest in blockchain technology. The report highlighted that the Asian market boasts over 1.7 billion video game players, accounting for 55% of the world’s total. In addition, Asia houses over half of the global gaming revenue and has long been “the driving force” behind the global gaming industry.

DappRadar claims that due to these factors, the Asia region “plays a crucial role in the adoption of blockchain gaming.” However, while China, Japan, and South Korea dominate the gaming industry in Asia, they have varying attitudes towards blockchain technology.

China, for instance, has banned crypto and prohibits gaming companies from integrating blockchain technology into their games. On the other hand, gaming companies in Japan and South Korea are “leading the way in the adoption of blockchain technology in gaming,” the report says. It points to Sony’s recent NFT-related patents and gaming firm Sega’s announcement of its upcoming blockchain game as evidence of this trend.

A survey of 1,030 Japanese men and women ranging in age from their 20s to 70s cited in the report revealed a promising outlook for the Japanese blockchain gaming industry. It revealed just over 40% of respondents were familiar with blockchain games, and over half of those familiar had a favorable impression of them.

The report also addressed the Web3 industry on a global scale, highlighting that “visual quality and game experience” are “slightly” more important factors for gamers when evaluating a new game over other aspects such as entry price, the number of active users, and game economies. The report also emphasized the significance of airdrops in motivating gamers to try out new games. It was stated that airdrops are considered “an essential factor,” with gamers still expecting to receive them before starting a new game.

It is clear that Asia will play a crucial role in the adoption of blockchain gaming in the coming years. While China’s attitude towards blockchain technology remains unclear, Japan and South Korea have already begun leading the way in adopting blockchain technology in gaming. As the gaming industry continues to evolve, it is likely that blockchain technology will become an increasingly important factor for gamers and game developers alike.

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