South Korea’s Evolving Regulatory Landscape for Cryptocurrencies: What to Expect

South Korea’s Evolving Regulatory Landscape for Cryptocurrencies: What to Expect

South Korea’s cryptocurrency industry is bracing for an impending shakeup as policymakers set their sights on regulation. The government’s primary objective is to safeguard investors by stamping out any fraudulent activities that may be lurking within the industry’s dark corners. While the specifics of these regulations remain unclear, one thing is certain: change is coming.

FIU Takes Action

South Korea has been actively engaged in the regulation of its digital asset market. In the latest development, the country’s Financial Intelligence Unit (FIU) has taken stringent measures against five cryptocurrency exchanges, namely Bithumb Korea, Coinone, Dunamu, Korbit, and Streami, for their blatant disregard of regulations pertaining to the reporting of irregular crypto trading. The exchanges have been found negligent in their duty to monitor and report suspicious transactions diligently, resulting in the discovery of several instances of irregular trading practices. The detected irregularities include using borrowed-name bank accounts for transactions and grossly insufficient internal controls.

Notably, the FIU unearthed one case of a 95-year-old man engaged in late-night trading of over 30 different types of cryptocurrency, covertly splitting his money into smaller amounts to avoid detection. In another instance, a customer repeatedly withdrew money promptly after large virtual asset deposits had been made, raising suspicion of wrongdoing. On top of these, the FIU found that one of the board members of a cryptocurrency exchange was involved in transactions using their spouse’s name, further underscoring the lackadaisical attitude towards internal controls.

As a result, the FIU has levied substantial fines and issued disciplinary warnings on the exchanges, with the potential to order further improvements if the corrective actions taken by the exchanges are deemed inadequate. The fines amount to a staggering 490 million won, and the exchanges have been given a strict deadline of three months to address the identified suspicious transactions. The neglect of duty by the cryptocurrency exchanges and the discovery of various irregular trading practices emphasize the urgent need for stricter regulations and improved monitoring mechanisms to thwart illegal activities such as money laundering in the crypto market.

Parliament Expected to Pass New Digital Asset Bills

The South Korean parliament is expected to pass a bill regulating the digital asset market in April 2023, which was proposed at the end of 2022. Currently, 18 digital asset bills are being debated in the Political Affairs Committee of the National Assembly of South Korea. These bills are part of the proposed Virtual Assets Act, which aims to regulate the digital asset market in South Korea. The bills cover a range of topics, including amendments to the Exchange Act and the Specific Financial Information Act, and the establishment of new regulations.

Out of the 18 bills, 11 are related to virtual assets, 4 are amendments to the Exchange Act for electronic financial services, 2 are amendments to the Specific Financial Information Act, and 1 is related to establishing financial institutions for digital assets. The parliament members have expressed their belief that the bill to regulate the digital asset market would likely be passed in April, owing to the intense debates that have been taking place in the Political Affairs Committee, with members narrowing their differences. Members of the first subcommittee have shown a keen interest in the bill and are expected to pass 18 digital asset bills by the end of the month.

The regulatory landscape for cryptocurrencies in South Korea is rapidly evolving, with new laws being proposed and enforced in response to the growing popularity of digital assets.

Actions Determine the Future

The government is willing to take legal action against crypto companies that engage in fraudulent activities. South Korean prosecutors also seek to extradite Do Kwon, a crypto entrepreneur accused of a multibillion-dollar fraud, to face charges in South Korea. Do Kwon was taken into custody in Montenegro, and South Korea and the US requested his extradition. There have also been attempts to arrest another Co-Founder of Terraform Labs, Shin Hyun-Seung, or Daniel Shin, in connection with the investigation into the collapse of the Terra-Luna cryptocurrency. Still, a South Korean court has twice dismissed the request for his arrest. This suggests that the government is willing to take legal action against crypto companies that engage in fraudulent activities.

With protecting their investors in mind, the domestic market has picked up a lot of confidence. They have seen a resurgence of cryptocurrency trading, particularly in XRP tokens. The trading volume for XRP has spiked to billions of dollars on top Korean exchanges like UpBitBithumb, and Korbit. In fact, XRP has overtaken Bitcoin in volume on the top 4 Korean exchanges.

crypto stats

Source: CoinGecko

They are taking steps to regulate the cryptocurrency industry and protect investors. There are also rumours that regulators have started to take notice of foreign cryptocurrency exchanges operating in South Korea through various affiliate marketing programs, social trading, and decentralized wallets. It seems like they will block domestic access to foreign cryptocurrency exchanges that lack the proper registration to operate in the country in due course. Previously, FIU has notified authorities that 16 firms allegedly violated this rule. Violating the registration requirements carries a maximum sentence of five years in prison or a fine of up to 50 million South Korean won (US$38,000).

Ending Remarks

South Korea’s efforts to regulate the rapidly evolving cryptocurrency landscape must be applauded for their aim to safeguard investors and combat fraud. However, the impact of these regulations could be more far-reaching and, dare I say, detrimental than initially anticipated. While well-intentioned, the imposition of rigorous regulations may deter reputable companies from entering the market and quash the spirit of innovation that has driven the cryptocurrency industry thus far. Companies may opt to relocate to jurisdictions with more lenient regulatory environments without a coherent global regulatory framework. This, in turn, could lead to a dangerous exodus of capital and talent from South Korea, leaving it in the dust.

Therefore, policymakers must take a nuanced approach that balances investors’ protection with the encouragement of innovation. Perhaps, instead of going it alone, South Korea could spearhead a collaborative effort that brings together regulators from around the world to craft a regulatory framework that is both effective and equitable. By doing so, South Korea could become a beacon of progress in the cryptocurrency industry, fostering creativity and responsible business practices.

South Korea is still one of the biggest forces in the cryptocurrency space and will remain competitive for years to come if they strike a good balance.

Source: https://www.financemagnates.com/cryptocurrency/south-koreas-evolving-regulatory-landscape-for-cryptocurrencies-what-to-expect/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Here Are the Most Popular Cryptocurrencies in South Korea: Report

Here Are the Most Popular Cryptocurrencies in South Korea: Report

The five most preferred digital assets by South Korean investors are Bitcoin (BTC), Ripple (XRP), Ether (ETH), Cardano (ADA), and Dogecoin (DOGE).

South Korean investors reportedly own over $5 billion worth of Bitcoin (BTC). Ripple (XRP) is the second most popular digital asset as locals hold nearly $4.8 billion in it.

BTC and XRP Lead the Way

South Korea’s leading crypto exchanges – Upbit, Bithumb, Coinone, and Korbit – conducted a study to determine which digital assets are the most attractive to local investors. The largest cryptocurrency by market capitalization – Bitcoin (BTC) – places first as South Koreans have invested more than $5 billion in it. The native token of Ripple – XRP – ranks second with around $4.8 billion distributed in it.

The third and fourth places belong to Ether (ETH) and Cardano (ADA), respectively. Investors own approximately $4.5 billion worth of the second-largest digital asset and nearly $1 billion in ADA.

Interestingly, the first-ever memecoin – Dogecoin (DOGE) – rounds up the top 5. South Koreans hold almost $900 million worth of it.

The report noted that local investors traded over $7 trillion in digital assets throughout 2021. The figure is more than the entire amount traded on the main Korea Composite Stock Price Index and the transactions on the junior Kosdaq.

South Korea Takes the Crypto Path

Last month, the East Asian country held its most contested presidential election. In the aftermath, the candidate of the Conservative party – Yoon Suk-yeol – collected only 263,000 votes more than his opponent and became South Korea’s next President. What’s more interesting is that he is a keen proponent of the cryptocurrency industry and vowed to turn his homeland into a digital asset hub.

During his campaign, he promised to allow initial coin offerings (ICOs) and increase the minimum threshold for paying capital gains tax on profits from crypto investments. He vowed to change the law and ensure that those who generate revenues of less than $40,000 annually should be exempt from paying taxes. Currently, such taxation is imposed on investors who make more than $2,000 per annum.

Korea Blockchain Association – a lobby group for crypto exchanges – envisioned that the new leader of South Korea will positively impact the local digital asset ecosystem. Secretary-General Yoon Seong-han said:

“We definitely welcome his stance as he is confident about boosting the industry. As ICOs are banned now, we have no choice but to issue coins in Singapore and other countries. Ventures and startups will be able to raise money easily from investors [if the ban is lifted].”

BigONE Exchange’s Chairman – Anndy Lian – also welcomed the new President of the country:

“He understands the importance of crypto. He understands the future, and it is unstoppable.”

 

Original Source: https://cryptopotato.com/here-are-the-most-popular-cryptocurrencies-in-south-korea-report/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Op-Ed: South Korea’s new president aims to take crypto to the next level

Op-Ed: South Korea’s new president aims to take crypto to the next level
Plans including raising the crypto tax threshold and legalizing ICOs are welcome, but will they give South Korea the shakeup it needs?
President Yoon Suk-Yeol plans to raise the current crypto tax threshold from around $2,000 to approximately $40,000. The current president Moon Jae-in lost the opportunity to take the country forward with a more positive crypto policy, in a country where last year Koreans invested over $43 billion in crypto assets in 2021.In April 2021 younger investors filed a number of petitions for example complaining how crypto assets were being taxed at a less favorable rate than stocks. Now this victory means that their voice is being heard, which I believe is great news, not just for the crypto industry, but for this new generation of investors. But at the same time, as someone involved in the Korean market since 2017 while I welcome the reports coming out of Yoon’s Presidential Transition Committee, I also know what matters is what happens after the new president takes office on May 10.

There is a risk the new government decides to allow investing in ICOs, IEOs, and STOs only to those above a certain income, to accredited investors. Certainly, the news of a new Basic Digital Asset Law, to enable the recovery of funds lost from illegal trades and scams is very welcome. But at the same time, a balance has to be struck, so the younger generation of investors in their 20s and 30s, who consist of around 36% of the market, feel they have a stake in the new system.

I also note that play-to-earn games are still illegal with no plans to change that. So, it’s somewhat ironic that the recent $620 million hack of Axie Infinity was reportedly carried out under the auspices of the North Korean government. While South Korea and the US are therefore looking to work more closely on cybercrime, there is a risk that the US will also seek to put pressure on the South Koreans to take a more highly regulated approach to crypto more in line with emerging US policy.

Will the prospect of a growing NFT market bear fruit?

What I do expect is for the market in NFTs in South Korea to grow in the future. And I think this presents a window of opportunity for the new government to take a positive approach. While the Financial Services Commission (FSC) is reportedly working to introduce NFT rules, this is yet to happen. Another potential source of frustration within the investor community is the complexity of using exchanges with different travel rule systems.

Among the big four exchanges Upbit, Bithumb, Coinone, and Korbit (with over 95% of the crypto market share), there are two travel rule systems. Upbit with the lion’s share of the exchange market has adopted its home-grown Verify VASP program, while the remainder follows another system. So, it’s perhaps good to know that Yoon’s Presidential Transition Committee is also “looking to grant more cash-to-crypto licenses to crypto trading platforms in efforts to dilute the local crypto exchanges oligopoly”.

Another overlapping issue is the dominance of the Upbit exchange in the South Korean crypto market. What’s interesting to me is seeing the concerted move by local banks to enter the crypto market. Part of the banks’ motivation to approach the incoming government is down to the fact that Upbit has over 80% of the market share.

This is underlined by the fact that Dunamu, operator of Upbit, posted a net income of 2.2 trillion won (around $1.8 billion) last year, with the figure growing 46-fold on-year. The news reportedly “shocked onlookers, as it drew near Woori Financial Group, a major banking group here. Woori posted a net income of nearly 2.6 trillion won in the same period”, according to the Korea Herald.

Banks fight for a slice of the crypto pie

Allowing banks to take apart on a more equal footing with exchanges certainly marks a step forward with potential implications for competition in regional crypto markets as well as internationally. Certainly, in Singapore, we have seen a tightening of regulations since the ICO boom years of 2017/18 which attracted so many crypto startups.

This stricter regulation has prompted startups to leave for the likes of more crypto-friendly Dubai, including global exchange Binance which recently withdrew an application to register in Singapore, instead setting up an office in the UAE.

The economic risks of not moving fast enough are also shown in the UK, where despite government plans for crypto growth there’s been significant criticism of its regulator, the FCA, for being too slow in processing crypto license applications to allow crypto startups to operate.

So, while I believe South Korea is likely to try to be more open, it’s going to be a tricky path to walk to keep all the different segments onboard, from crypto industry stakeholders to expectant younger investors. The ‘proof is in the pudding’ as they say, because while the incoming government might talk about plans to legalize ICOs it may in the fine print only be available to people who have say $1 million in assets.

However, on a more optimistic note, I do agree with crypto commentators such as Anthony Pompliano that South Korea’s crypto plans are potentially a significant step on the world stage. Yoon Suk-yeol is the first head of state from a major economy that says it plans to take crypto really seriously, including protecting the public; however, it’s also worth noting that outlined plans to set up a dedicated government agency for crypto and NFTs did not make it into the final copy of his campaign pledges.

Speaking recently in Korea on the same platform with a member of the People’s Power Party, I said that crypto and blockchain was the future. We now have to wait and see how well that promise and potential is delivered.

 

Original Source: https://cryptoslate.com/op-ed-south-koreas-new-president-aims-to-take-crypto-to-the-next-level/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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