New legislation to protect cryptocurrency exchange users faces mixed reactions

New legislation to protect cryptocurrency exchange users faces mixed reactions

South Korea’s Financial Services Commission (FSC) introduced new legislation last week to bolster state-led oversight of the local cryptocurrency sector and enhance user protection despite concerns among industry leaders.

While South Korea’s burgeoning cryptocurrency market attracts increasing interest from global blockchain enterprises, recent high-profile incidents such as the collapse of Terra — a South Korean-led blockchain platform — point to the continued lack of centralized measures to safeguard the users’ assets.

The South Korean government’s pledge to improve its regulatory framework by enacting the Act on the Protection of Virtual Asset Users is, in part, a response to such concerns.

However, experts told Korea Pro that the country’s new legal measure comes with a significant risk, contradicting the fundamental allure of the cryptocurrency market — decentralization.

THE NEW LAW

Scheduled to take effect from July 19, after being passed by the National Assembly last June, the primary aim of the Act on the Protection of Virtual Asset Users is to oversee and protect participants in the burgeoning virtual assets market.

The law’s core objective is to protect individuals engaged in various activities within this domain, including trading, exchanging, transferring, storing, or managing virtual assets. Essentially, it serves as a regulatory framework designed to uphold the integrity of cryptocurrency transactions while prioritizing the security of users’ assets.

Under the legislation, virtual assets are defined as “electronic proofs” — assets that possess economic value and are tradable or transferable electronically. The law also delineates entities excluded from virtual assets, such as in-game currencies, and imposes obligations on virtual asset service providers (VASPs) to manage users’ deposits and assets securely.

In particular, regulations mandate that a significant portion of user assets must be stored in secure offline storage — known as cold wallets — to mitigate the risk of hacking and security breaches.

It also establishes criteria for insurance coverage or reserve fund accumulation to address risks stemming from hacking or system failures, stating that companies must have insurance or reserves to compensate users. The amount of insurance coverage required depends on the value of assets the company holds.

To address issues concerning the disclosure of vital information, insider trading, and the blocking of user assets, the legislation prohibits unjustifiable blocking of user deposits and assets, mandating crypto exchanges monitor abnormal transactions and impose severe fines for unfair trading practices.

Oh-hoon Kwon, a representative attorney at Cha & Kwon, told Korea Pro that the new act will still apply to fraudulent activities overseas if their effects are felt domestically.

“This means that foreign VASPs conducting business targeting Korea are also subject to this act,” Kwon said.

The new legislation follows the implementation of a similar law on regulating uniformity for crypto-assets in the European Union, enacted last June.

However, Kwon noted to Korea Pro that Seoul’s new law on crypto exchanges differs from the EU’s Markets in Crypto-Assets Regulations (MiCA) law in that MiCA has a broader target scope, regulating various aspects of crypto-assets across different operational domains while Seoul’s new legislation is more narrowly tailored, specifically targeting activities within virtual asset exchanges.

RECENT CONTROVERSIES

The act was prompted by a significant industry shakeup involving Terraform Labs, the start-up behind Terra, a blockchain protocol and payments platform, and its founder, Do Kwon.

Terra blockchain specialized in algorithmic stablecoins, which are cryptocurrencies backed by reserve assets such as fiat currencies like the U.S. dollar and aim to maintain a 1:1 peg with the underlying currency.

However, terraUSD (UST), instead of being backed directly by fiat currency reserves, relied on algorithmic equations and its sister cryptocurrency, LUNA, to stabilize its supply and demand, thereby maintaining its value at $1 as it fluctuated alongside the U.S. dollar.

Before its crash, Terra had gained significant attention within the crypto community. However, in May 2022, concerns about Do Kwon’s alleged involvement in illicit activities and questionable business practices emerged, triggering a sell-off of UST and LUNA tokens.

This also caused UST to “de-peg” from the dollar, meaning its value was no longer fixed at $1 and fluctuated independently. Consequently, both cryptocurrencies experienced a collapse in value.

Thousands of investors lost over $400 billion in investments, highlighting the necessity for transparency, accountability and regulatory compliance in the virtual asset market and prompting governments to forge newer regulations to protect against such incidents.

Edward Dhong, a senior foreign attorney at Yoon & Yang, told the Asia Law Business Journal that the country’s insufficient regulations to safeguard virtual asset users did not align with South Korea’s substantial scale of crypto transactions in 2021.

A STEP IN THE RIGHT DIRECTION?

Amid fears of a collapse similar to the one seen with Terra and to ensure user protection, the new law targets cryptocurrency exchanges based in South Korea, mandating they store user assets through banks in bond and offline to enhance user security.

Third-party management operations are also barred, and service providers must hold assets identical in amount and type to those entrusted by users.

The new act is the latest in the National Assembly’s continued efforts to streamline legislation in line with unconventional currencies, such as tabling a bill to oversee digital assets independently in Nov. 2022.

In the past, the legal system was subject to more regulatory gaps, as cryptocurrencies were under the jurisdiction of the Capital Markets Act, which is designed for a broader financial market.

Experts told Korea Pro that Seoul’s effort to protect virtual investor assets has been a necessary step forward, considering user concerns about the emerging crypto market.

Anndy Lian, an inter-governmental blockchain advisor based in Singapore, lauded the new law as a catalyst for nurturing a transparent legal environment conducive to the growth and innovation of virtual assets.

He told Korea Pro that it could potentially “attract more investment and participation from domestic and foreign entities.”

Lian also anticipated a “smoother integration of virtual assets into the existing financial system,” allowing for more efficient transactions and services and an improvement in the standards of market practice in South Korea.

While attorney Kwon echoed Lian’s views, outlining that the law provides the groundwork for restraining fraudulent virtual asset trading activities within the market, he also highlighted the need for the law to incorporate additional guidelines offering clarity on its clauses.

“While this legislation targets fraudulent virtual asset trading activities, such as unfair trading, it lacks specific details regarding the various forms of fraudulent behavior,” Kwon explained.

Lian also acknowledged this, noting several significant hurdles the legislation must overcome to successfully exercise its projected role in the South Korean virtual asset market.

He noted that the stringent regulations could potentially cause VASPs to exit the South Korean market and restrict crypto services for South Korean users, as the costs and guidelines required by South Korean jurisdiction may prove too challenging.

“We need to understand that we are dealing with innovation and it changes very fast. Creating a baseline and having backup correction plans along the journey would be a more protective method for the South Korean market,” according to Lian.

 

Source: https://koreapro.org/2024/02/new-legislation-to-protect-cryptocurrency-exchange-users-faces-mixed-reactions/

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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Web3: A New Frontier or a False Dawn?

Web3: A New Frontier or a False Dawn?

Web3 is a term that describes the next evolution of the internet, which is based on decentralization and often uses blockchain technologies, such as different cryptocurrencies and non-fungible tokens (NFTs). The goal is to create a more open, fair, and democratic web, where users have more say over their own data, identity, and assets, and where middlemen and gatekeepers are replaced by peer-to-peer networks and protocols.

Web3 is different from Web2, the current version of the internet, which depends on centralized platforms and services that offer user-generated content, social media, and e-commerce. Web2 has brought a lot of innovation, connectivity, and convenience, but it has also caused problems such as data leaks, privacy violations, censorship, misinformation, and monopolization. Web3 tries to solve these problems by using the power of blockchain, a technology that records transactions in a secure, transparent, and unchangeable way. Blockchain allows the creation of digital assets that are rare, verifiable, and customizable, such as cryptocurrencies and NFTs. Cryptocurrencies are digital money that can be used for various purposes, such as payment, saving, or accounting, without the need for a central authority or intermediary.

NFTs are unique digital codes that can prove ownership and authenticity of any digital or physical item, such as art, music, or collectibles. Web3 also depends on the concept of smart contracts, which are agreements that are programmed on the blockchain and can do various things, such as sending money, checking conditions, or triggering events.

Smart contracts enable the creation of decentralized applications (DApps), which are applications that run on a network of computers, rather than on a single server or company. DApps can offer various services, such as decentralized finance (DeFi), gaming, social media, and more.

What is the main driver for Web3 in 2024?

In my opinion, Web3 is still in its early stages of development, and there are many challenges and uncertainties that need to be overcome before it can reach mass adoption. Some of these challenges include scalability, interoperability, usability, regulation, and security. However, there are also many factors that are driving the growth and innovation of Web3 in 2024, such as:

• The growing demand for digital sovereignty, privacy, and security, as users become more aware and concerned about the risks and drawbacks of Web2, such as data misuse, surveillance, manipulation, and censorship. Web3 gives users more control and ownership over their own data, identity, and assets, as well as more transparency and accountability over the platforms and services they use.

• The increasing popularity and value of cryptocurrencies and NFTs, as more people, brands and institutions recognize their potential as alternative forms of money, investment, and expression. Cryptocurrencies and NFTs enable new ways of creating, exchanging, and storing value, as well as new forms of art, culture, and community.

• The emergence and development of new technologies and standards that enable faster, cheaper, and more efficient transactions and interactions on the blockchain, such as layer-2 solutions, cross-chain bridges, decentralized identifiers, and verifiable credentials. These technologies and standards aim to improve the scalability, interoperability, and usability of Web3, making it more accessible and attractive to a wider audience.

• The support and involvement of various stakeholders, such as developers, entrepreneurs, investors, regulators, and users, who are contributing to the innovation and adoption of Web3. Developers are creating new and improved DApps and protocols that provide various solutions and opportunities for Web3 users. Entrepreneurs are launching new and exciting projects and platforms that leverage the power of Web3. Investors are funding and supporting the growth and development of Web3 projects and platforms. Regulators are providing guidance and clarity on the legal and regulatory aspects of Web3. And users are exploring and experimenting with the various possibilities and benefits of Web3.

Do you think NFTs will have a big comeback?

NFTs are one of the most prominent and controversial aspects of Web3. NFTs have been used to create and trade digital art, music, collectibles, and other forms of creative expression, generating billions of dollars in sales and attracting mainstream attention and participation.

However, NFTs have also faced criticism and skepticism, due to their environmental impact, legal ambiguity, and speculative nature.

According to Cryptoslam, NFTs experienced a huge boom in 2022, reaching a peak of over $23 billion in sales. As we all know, they also suffered a sharp decline in the following months, dropping to less than $8 billion in sales in the 2023. This was due to various factors, such as market saturation, regulatory uncertainty, technical issues, and fraud. Despite the past slump, NFTs have shown signs of recovery and resilience in 2024, thanks to several developments and trends, such as:

• The improvement and adoption of more energy-efficient and eco-friendly blockchain technologies, such as proof-of-stake, layer-2 solutions, and carbon offsetting. These technologies aim to reduce the environmental impact and carbon footprint of NFTs, which have been a major source of criticism and concern.

• The emergence and popularity of new and diverse forms and genres of NFTs, such as gaming, metaverse, music, sports, and social media. These forms and genres of NFTs offer more utility, functionality, and interactivity to users, as well as more opportunities for creators, artists, and celebrities.

• The integration and collaboration of NFTs with other Web3 platforms and services, such as DeFi, DAOs, and DEXs. These platforms and services enable new and innovative ways of creating, financing, governing, and exchanging NFTs, as well as enhancing their value and liquidity.

• The recognition and acceptance of NFTs by various institutions, organizations, and individuals, such as museums, galleries, brands, celebrities, and influencers. These entities are using NFTs to showcase, promote, and monetize their work, as well as to engage and reward their fans and followers.

Therefore, I think that NFTs will have a big comeback in 2024, as they continue to evolve and expand their scope and impact. It will not only be a form of digital art, but also a form of digital identity, culture, and economy. It will not only be a niche and novelty, but also a norm and necessity.

In my opinion, NFTs will not only be a part of Web3, but also a driver of Web3.

Conclusion

Web3 is a vision for a new and improved internet, where users have more freedom, power, and value. Web3 is driven by various factors, such as the demand for digital sovereignty, the popularity of cryptocurrencies and NFTs, the innovation of new technologies and standards, and the support of various stakeholders. It is also challenged by various obstacles, such as scalability, interoperability, usability, regulation, and security.

Other visionaries such as Anndy Lian who talks about Web4, Jack Dorsey on Web5 and Justin Sun on Web6, I still believe Web3 is still in its infancy, and its future is uncertain and unpredictable. It is full of potential and promise, and its future is exciting and inspiring. NFTs are one of the most prominent and controversial aspects of Web3. NFTs have been used to create and trade digital assets, generating billions of dollars in sales and attracting mainstream attention and participation.

NFTs have also faced criticism and skepticism, due to their environmental impact, legal ambiguity, and speculative nature. NFTs experienced a huge boom and a sharp decline, but they have shown signs of recovery and resilience in 2024, thanks to several developments and trends, such as the improvement and adoption of more eco-friendly blockchain technologies, the emergence and popularity of new and diverse forms and genres of NFTs, the integration and collaboration of NFTs with other Web3 platforms and services, and the recognition and acceptance of NFTs by various institutions, organizations, and individuals.

Web3 and NFTs are not just technologies, but also movements and cultures. They represent a new way of thinking and living in the digital age, where users are empowered, connected, and creative.

 

Source: https://hackernoon.com/web3-a-new-frontier-or-a-false-dawn

FAQ

What is Web3, and how does it differ from Web2?

Web3 is the next evolution of the internet, focusing on decentralization and utilizing blockchain technologies like cryptocurrencies and NFTs. In contrast, Web2 relies on centralized platforms, leading to issues like data leaks, privacy violations, and monopolization.

What are the main drivers for Web3 in 2024?

The growth of Web3 in 2024 is fueled by factors such as the increasing demand for digital sovereignty, privacy, and security, the popularity and value of cryptocurrencies and NFTs, advancements in technologies improving scalability and interoperability, and the support from various stakeholders contributing to Web3's innovation.

Do you think NFTs will experience a significant comeback in 2024?

Yes, despite a previous decline in 2023, NFTs are expected to make a comeback in 2024. This resurgence is attributed to improvements in eco-friendly blockchain technologies, the emergence of new NFT forms and genres, integration with other Web3 platforms, and increased acceptance by institutions and individuals.

What challenges does Web3 face in its development?

Web3 encounters challenges such as scalability, interoperability, usability, regulation, and security. Overcoming these obstacles is crucial for its mass adoption and successful implementation.

Are we stopping at Web3?

It will not stop. Other visionaries such as Anndy Lian who talks about Web4, Jack Dorsey on Web5 and Justin Sun on Web6, I still believe Web3 is still in its infancy, and its future is uncertain and unpredictable. It is full of potential and promise, and its future is exciting and inspiring.

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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Spot Bitcoin ETF Application Marks New Era For Hong Kong: Will It Unlock A Flood Of Chinese Investment?

Spot Bitcoin ETF Application Marks New Era For Hong Kong: Will It Unlock A Flood Of Chinese Investment?

In a significant development for the cryptocurrency market in Hong Kong, Harvest Fund has officially applied to the first-ever Bitcoin (CRYPTO: BTC) spot Exchange Traded Fund (ETF) with the Hong Kong Securities and Futures Commission (SFC).

Why It Matters:

The submission of this application by Harvest Fund is a clear indicator of the growing interest and acceptance of cryptocurrencies in mainstream financial markets.

This initiative follows closely on the heels of the U.S. Securities and Exchange Commission’s approval of the first batch of Bitcoin spot ETFs just two weeks prior, a decision that has seemingly influenced the SFC’s accelerated pace in this domain.

The potential approval of this ETF in Hong Kong could significantly broaden investment opportunities and attract a wider range of investors, including family offices that have previously been hesitant to directly engage in the Bitcoin market due to its complexity and perceived risks.

According to Anndy Lian, an intergovernmental blockchain advisor, the Chinese stock market was one of the worst performers globally in 2023, funds looking for crypto alternatives are a big plus for the crypto industry.

Read Also: Unlocking Crypto Riches: Crypto Expert Shares Guide How To Value Tokens

What’s Next:

The SFC is reportedly eager to expedite the approval process for Hong Kong’s first spot Bitcoin ETF, with plans to list it on the Hong Kong Stock Exchange shortly after the Chinese New Year.

This development could pave the way for multiple institutions to enter the market, mirroring the approach taken in the U.S., where firms like GrayscaleBlackRock Inc. (NYSE:BLK), and Fidelity rapidly grew their ETFs’ sizes.

 

Source: https://markets.businessinsider.com/news/etf/spot-bitcoin-etf-application-marks-new-era-for-hong-kong-will-it-unlock-a-flood-of-chinese-investment-1033006451

https://www.benzinga.com/markets/asia/24/01/36823522/spot-bitcoin-etf-application-marks-new-era-for-hong-kong-will-it-unlock-a-flood-of-chinese-investmen

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”.

j j j