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ETF Legislation’s Uncertain Future Polarizes South Korea’s Political Landscape

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South Korea’s democratic opposition party recently suggested a plan to allow local issuing, making available and dealing with Exchange Traded Funds (ETFs), including those tied to Bitcoin and other cryptocurrencies. Nevertheless, the ruling Peoples Power Party has faced considerable opposition to this move. The governing group is wary that these ETF investments can retard the growth of the domestic capital market.

The Financial Services Commission has not made a decision yet on this matter. The result is an ongoing debate expected to continue even after the forthcoming general elections. Democratic Party recommends the integration of digital assets within institutional frameworks as per the global trends. They emphasize the prospect of expanding investment opportunities and fortifying national assets via tax exemptions.

We would allow the issuance, listing, and trading of spot ETFs with Bitcoin and other underlying assets. […] Once the 22nd National Assembly is inaugurated, we will immediately push for revision of the Capital Markets Act, said the Democratic Party’s Policy Committee.

On the other hand, the ruling party alternatively opts for a more cautious approach, expressing concerns about likely capital outflows from the stock market to the much more volatile digital asset market. Some analysts have suggested that this “strategic ambiguity” is a ruling party strategy meant to accommodate varied interests within an election landscape.

There are concerns that if Bitcoin spot ETF investment is allowed, money in the domestic stock market could flow out into the virtual asset market, […] It is an understandable issue, said a key ruling party official.

The Future of Bitcoin ETFs In South Korea

The future of South Korean spot Bitcoin ETF legislation depends on the result of the election and the subsequent political dynamics, given the significant differences between the ruling and opposition parties. Financial authorities have stated that they are open to considering the proposal but have not established a definitive timeline.

The recent approval by the U.S. Securities and Exchange Commission (SEC) for the listing of spot Bitcoin ETFs has led South Korean authorities to caution against brokering ETFs listed overseas, citing potential breaches of existing regulations. This highlights the regulatory challenges and uncertainties surrounding South Korean spot Bitcoin ETFs.

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OKX Expands Into Argentina While Faces Scrutiny In South Korea

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One of the world’s top global cryptocurrency exchanges, OKX, has officially opened its services in Argentina. By this, OKX aims to cover a growing portion of interest in the demand for crypto services in one of the most bubbling markets of Latin America. Easing operations for Argentine users at OKX will be a goal that will seek to support the Spanish language and popular local payment methods through its peer-to-peer platform.

The exchange is known for reliability which has deep liquidity for all kinds of assets, cryptos for trading, and staining features. Apart from the exchange, OKX is opening up its non-custodial Web3 Wallet, which is a secure platform for the convenience of handling Decentralized Finance (DeFi) activities, trading in NFTs, and diversified Decentralized Applications (dApps).

Hong Fang, President of OKX, expressed delight at expanding their services into Argentina, said:

We’re pleased to officially launch our latest expansion of our world-class crypto exchange and Web3 wallet in one of Latin America’s most vibrant crypto markets. As pioneers at the nexus of technology and finance, our user-centric approach aims to accelerate adoption by meeting local needs first.

Additionally, Alejandro Estrin, OKX Argentina’s Country Manager, highlighted that the role of trust is key for the platform to become mainstream. This will be generated through a base built on transparency, security, and compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations, with users.

OKX Faces Probe In South Korea

Despite the global success, it comes under South Korean scrutiny on suspicion of rule violation. The Digital Asset Exchange Association (DAXA) reported the exchange to the local authorities for trading without appropriate registration. Notably, it came to light that the exchange had marketed its Jumpstart program to local cryptocurrency users through the use of Telegram influencers.

Although OKX has explicitly denied the provision of services to South Korean investors, the association has said that the promotional activities of the exchange were more toward Korean users, which could be against the regulations. DAXA has forwarded the case to the Financial Intelligence Unit (FIU) to investigate further.

In regard to the accusations, OKX highlights the observance of compliance and doesn’t even render support in the Korean language for its activity on the website, hence revealing the absence of willingness to operate in-country. However, the means of the advertisement that addresses the Korean user still leaves concern.

However, the result of the FIU’s investigation would determine whether OKX had violated regulations regarding the operation of undeclared virtual asset businesses in South Korea. However, regulation holds an important role for exchanges that want to enter into the new markets, holding trust and integrity.

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South Korea Cracks Down On Crypto Crimes With Harsh Penalties

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South Korea is preparing to enforce a new law that will protect crypto asset users from market manipulation, illegal trading, and information abuse, according to the local media. The law, which will take effect on July 19, 2024, will impose heavy fines and prison sentences for offenders, including life imprisonment for those who make more than 5 billion won from crypto-related crimes.

The law, officially known as the Virtual Asset User Protection Act, was passed by the National Assembly in July 2023, with a one-year grace period. The Financial Services Commission (FSC), the country’s top financial regulator, announced on Wednesday that it had completed the preliminary legislative notice on the enforcement decree and supervisory regulations of the law.

The FSC said that the law aims to address various concerns within the virtual asset landscape, especially the prohibition of market manipulation, illegal trading practices, and the misuse of undisclosed material information related to virtual assets. The FSC also said that it is setting up infrastructure for supervisory, inspection, and investigation tasks as stated in the law.

Severe Penalties For Violators

According to the law, offenders who violate the regulations will face criminal prosecution, including imprisonment for a minimum of one year, or fines ranging from three to five times the amount of illegal profits. In cases where unfair profits exceed 5 billion won, perpetrators may face a maximum sentence of life imprisonment, coupled with fines equivalent to twice the amount of unfair gains.

The law also stipulates that virtual asset business operators, such as exchanges, must adhere to stringent regulatory directives issued by financial authorities. For example, they must ensure the secure management of user deposits held in banks for virtual asset transactions, and securely store over 80% of users’ virtual assets’ economic value in offline storage, distinct from internet-connected systems, to mitigate risks like hacking or system failures.

Additionally, they must either acquire insurance coverage or set aside reserves equivalent to over 5% of the total economic value of virtual assets, excluding those stored offline. These measures will mitigate potential losses and safeguard users’ assets in unforeseen circumstances.

A Crypto Hub With Consumer Protection

South Korea is one of the leading countries in the world in terms of crypto adoption and innovation. However, it has also witnessed several cases of fraud and scams involving virtual assets. For instance, the CEO of Bitsonic, a former major crypto exchange, was sentenced to seven years in prison for his involvement in a $10 million fraudulent scheme that involved inflating the trading volume and price of Bitsonic Coin, the exchange’s native token.

The FSC said that the new law will help prevent such incidents and enhance consumer protection within the virtual asset realm. The FSC also said that it will oversee compliance with the law, conducting routine inspections of virtual asset business operators to ensure adherence to regulations.

By introducing stricter regulations and penalties for crypto crimes, South Korea aims to become a crypto hub that balances innovation and consumer protection. The law is expected to boost the credibility and transparency of the virtual asset industry, as well as the trust and confidence of the users.

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South Korea Takes Action Against Haru Invest Leadership

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South Korean authorities have brought forth allegations against Haru, a crypto yield platform, indicating that it misrepresented risks to its depositors while enticing them with a lucrative 12% return. In a notable development, South Korean prosecutors announced on Monday the arrest and detention of three top executives from Haru Invest, among whom are the co-CEOs.

South Korea’s Anti-Corruption Drive

Seoul prosecutors have leveled accusations against the trio, alleging the misappropriation of approximately 1.1 trillion Korean won (equivalent to $826 million) in cryptocurrencies from roughly 16,000 users. An official from the Seoul Southern District Prosecutor’s Office confirmed these details to The Block. Additionally, it’s reported that Haru purportedly entrusted a significant portion of its client deposits to a single individual while falsely assuring investors that their funds were managed through “risk-free distributed investment techniques.” Notably, Haru Invest enticed clients with the promise of up to a 12% yield for users of its Earn Plus product.

Local authorities have been actively investigating both Haru and another crypto lender, Delio, following the abrupt suspension of withdrawals on June 14, 2023. Delio attributed the suspension to the sudden cessation of deposits and withdrawals earlier that day at Haru Invest, with whom Delio had previously collaborated. Simultaneously, Haru lodged a criminal complaint against B&S Holdings, a consignment operator, alleging deception and citing losses exceeding $260 million due to the collapse of FTX. South Korean prosecutors had previously issued an arrest warrant for an individual identified as Bang, the majority shareholder of B&S. However, due to privacy regulations in South Korea, Bang’s full name remains undisclosed.

The unfolding saga sheds light on the intricate web of alleged deceit and financial malpractice within the crypto industry. The arrest and detention of Haru Invest executives mark a significant development in the ongoing investigation into what appears to be a far-reaching and elaborate scheme. Authorities remain vigilant in their pursuit of justice amidst mounting concerns over the integrity and transparency of crypto investment platforms in South Korea and beyond.

South Korea May Abolish Crypto Tax Amid New Tax Reform

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The South Korean government is considering whether to exempt cryptocurrency gains from income tax as part of its new tax reform plan. Jeong Jung-hoon, deputy minister of the tax and customs office for the Ministry of Economy and Finance, said on Wednesday that the National Assembly should debate whether to include crypto assets in the proposed abolition of income tax for financial investments, ZDNet reported.

The tax reform plan, announced on Wednesday, aims to stimulate economic activities, stabilize people’s livelihood, strengthen fiscal sustainability and tax fairness, and enhance taxpayer convenience. One of the key policies is to rescind the taxation on financial investments, such as stocks and funds, to encourage the accumulation of wealth and financial planning of citizens.

The administration under President Yoon Suk-yeol also intends to lower the top corporate tax rate from 25% to 22% and simplify the tax bracket from four to two or three.

Crypto Tax Regime To Take Effect In 2025

The country’s crypto tax regime, which was postponed by two years in December, is set to take effect on Jan. 1, 2025. Under the current law, taxpayers with more than 2.5 million Korean won ($1,865) in digital asset gains in a year will have to pay a 22% tax on their profits. The tax regime on financial investment income is scheduled to commence on the same day.

Jeong said that the government plans to submit an amendment to the income tax law regarding financial investment taxation in late January or early February, according to ZDNet. The national election for the National Assembly is slated for April 10, giving the current lawmakers a narrow window to review and pass the proposed amendments.

The issue of crypto taxation has been controversial in South Korea, as some argue that it is unfair to tax digital assets that are not legally recognized as currencies or financial assets. Others contend that crypto taxation is necessary to prevent tax evasion and money laundering and to align with the global trend of regulating the crypto market.

The government has also implemented strict measures to monitor and crack down on illegal activities in the crypto sector, such as requiring real-name verification for digital assets transactions and banning cross-trading on crypto exchanges.

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South Korea Considers Crypto Mixer Sanctions Following US Lead

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The South Korean government is considering imposing sanctions on the use of crypto mixing services, according to a recent report by the South Korean financial regulator, the Financial Intelligence Unit (FIU). The move would follow the example set by the United States amid growing concern over the use of mixers for illegal money laundering operations.

Cryptocurrency mixing services combine potentially identifiable “tainted” funds with others to obscure the trail back to the original source. While launched for privacy reasons, over time, they have become a common money laundering tool for criminals. As a result, there is considerable risk in using mixers to conceal funds or launder money.

South Korea Weighs Crypto Mixer Rules

According to the report, South Korea’s Financial Intelligence Unit (FIU) has begun discussing introducing regulations around digital asset mixing services similar to those in the US. An FIU official said the talks started after the US introduced sanctions on crypto mixers, adding that discussions are still in the early stages.

The report notes the FIU has just started considering the need for mixer regulations, a process that could take significant time. While few details are available, any new rules would likely restrict or punish the use of mixing services for illegal activities.

Mixers and online gambling sites have the most severe money laundering problems, processing the vast majority of dirty digital currencies. This has led the US government to announce various sanctions against major crypto-mixing platforms.

The first came in August 2022 when the US Treasury Department sanctioned Tornado Cash, a popular mixer. Later, in November 2023, the government announced additional sanctions against the Sinbad mixer over alleged North Korean ties. These actions set a precedent South Korea is now considering following.

Crypto Mixers Obscure Illicit Funds

By mixing potentially identifiable cryptocurrency funds with others, mixers help obscure the trail back to the original source. As a result, over time, they have become a common way for criminals and scammers to launder stolen digital funds, even though they were created to provide users with more privacy.

Figures show that mixers and online gambling sites have the most severe cryptocurrency money laundering problems. They are responsible for processing vast amounts of illegally obtained digital currencies. This has made them a target for regulators and law enforcement seeking to crack down.

As discussions continue in South Korea, additional details around potential crypto mixing regulations will likely emerge. However, early indications suggest the government aims to follow the US lead in restricting their use for illegal money laundering and sanctions evasion. The precedent is set, and South Korea appears poised to take similar action targeting mixer services.

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South Korea’s FSC Issues Crypto Warning Amid US Bitcoin ETF Surge

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South Korea’s Financial Services Commission (FSC) has issued a warning to the US regulators and the crypto market, saying that it may violate the country’s laws and regulations if they allow US spot Bitcoin exchange-traded funds (ETFs) to be listed and traded in South Korea, according to Bloomberg.

The FSC said in a statement on Thursday that it is concerned about the potential impact of US spot Bitcoin ETFs on the stability of the South Korean financial system and the protection of investors. It also said that it plans to review its digital asset rules as overseas regulation changes.

The warning came after the US Securities and Exchange Commission (SEC) approved around a dozen ETFs to directly hold Bitcoin earlier this week, sparking a strong demand from investors. The first batch of US spot Bitcoin ETFs, including offerings from BlackRock Inc. and Fidelity Investments, saw some $4.6 billion of shares change hands in a frenetic Wall Street debut on Thursday.

The news sent shockwaves through the crypto market, as many South Korean crypto-related stocks plunged in early Friday trading. Wizit Co., a leading crypto exchange operator, dropped as much as 13%, and other stocks such as Upbit Co., Coinplug Inc., and Bitget Co. also suffered heavy losses.

FSC Warning Raises Concerns In Crypto

South Korea is known for being one of the most crypto-friendly countries in the world, with a digital assets bill passed last year to bolster investor protection and innovation. However, consumer safeguards have been in focus since the more than $40 billion implosion of tokens created by Do Kwon, a former Samsung executive who was accused of fraud and money laundering.

The FSC’s warning could signal a shift in its stance on crypto assets, which have been subject to frequent crackdowns by the government in recent years. The FSC has previously banned initial coin offerings (ICOs), virtual asset service providers (VASPs), and online gambling platforms involving cryptocurrencies.

The FSC’s warning could also affect the prospects of more crypto ETFs being launched in South Korea or elsewhere, as it may create legal uncertainties and regulatory hurdles for both local and foreign issuers. The SEC has not yet announced whether it will approve any more spot Bitcoin ETFs.

Industry backers see the US spot Bitcoin ETFs as the ultimate springboard for broader mainstream adoption by everyday investors and the catalyst for further gains. However, some analysts warn that there are still many risks and challenges ahead for both the US regulators and the crypto market.

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South Korea Targets Crypto Risks: Proposed Ban On Credit Card Purchases

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In a bid to curb potential illegal outflows and money laundering, South Korea’s top financial regulator, the Financial Services Commission (FSC), is proposing significant changes to the country’s credit finance laws. The proposed amendments aim to prohibit local citizens from using credit cards to purchase cryptocurrencies, particularly from foreign exchanges.

Crypto Credit Clampdown

The Financial Services Commission Notice released detailed information about the proposed changes. The primary reasons cited for the revision of the Enforcement Decree of the Credit-Specialized Financial Business Act include concerns about the illegal outflow of domestic funds overseas, potential money laundering risks, speculative activities, and the encouragement of speculative behavior.

One of the key modifications outlined in the proposed amendments is the expansion of the scope of prohibited credit card payments. The draft specifies that payments for virtual assets, as defined by the “Act on the Protection of Virtual Asset Users,” will be prohibited. This move is intended to address concerns about the outflow of funds to overseas virtual asset exchanges.

The FSC also aims to resolve regulatory arbitrage related to the limit on providing economic benefits when recruiting new credit cards. Currently, there are varying limits for online and offline recruitment methods. The proposed amendment seeks to standardize the limit to 100% of the annual fee, irrespective of the recruitment method, thus eliminating regulatory differences.

In addition, the proposed changes include an increase in the usage limit of prepaid cards. The existing law caps the maximum issuance amount at 500,000 won, but the amendment acknowledges the need to accommodate the increasing unit price of child meal payments. Accordingly, the maximum issuance amount for children’s meal cards is set to be raised to 1 million won, aiming to alleviate inconveniences caused by exceeding the current usage limit.

Lastly, the FSC aims to diversify funding methods for credit finance companies by expanding the assets that can be securitized. The current limitation to assets related to the companies’ own business, such as installments and leases, will be broadened, allowing credit-specialized financial companies to explore alternative means of raising funds.

The proposed amendments underscore South Korea’s commitment to strengthening regulatory measures surrounding cryptocurrency transactions, reflecting a broader global trend toward increased scrutiny of the digital asset market. The FSC encourages public input on these proposed changes, emphasizing transparency in the decision-making process.

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South Korean Lawmakers’ Crypto Trading Faces Scrutiny: Report

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Lawmakers in South Korea have come under intense scrutiny after an Anti-Corruption and Civil Rights Commission inspection uncovered widespread involvement in cryptocurrency trading. From May 30, 2020, to May 31, 2023, the investigation encompassed all 298 sitting lawmakers, revealing substantial irregularities in some instances.

According to a recent report, the exhaustive 90-day examination revealed that 18 lawmakers possessed virtual assets, with 11 actively participating in trading. Transactions totaled 62.5 billion won ($48.4 million) for purchases and 63.1 billion won ($48.8 million) for sales, prompting questions about the nature of these dealings and their potential gains. However, the detailed report left the motives and implications of these transactions open to interpretation.

Lawmakers’ Cryptocurrency Holdings Revealed

The commission’s exhaustive report provided insight into the wide variety of virtual assets these lawmakers hold, revealing holdings across 107 different cryptocurrencies. Notably, Bitcoin emerged as the most prevalent among these holdings, reflecting a parallel trend observed in the expansive global cryptocurrency market.

Moreover, discrepancies surfaced in the transaction and holding records of 10 lawmakers compared to their earlier voluntary declarations this year. One lawmaker conducted 49 cryptocurrency transactions without reporting them to the National Assembly, referring to an account with a now-defunct cryptocurrency exchange.

Ethical concerns emerged regarding the timing of some transactions. The commission noted that changes in virtual asset holdings for three lawmakers coincided with their involvement in standing committee meetings. Although these actions did not breach conflict of interest prevention laws, they raised significant concerns about the legislators’ commitment to their parliamentary duties.

Responding to these revelations, the commission proposed new parliamentary regulations mandating lawmakers to report their virtual asset holdings. This initiative aims to enhance transparency and accountability within the National Assembly, especially given the upcoming term following the April 10 general elections.

The investigation highlights the need for clearer regulations and ethical guidelines governing lawmakers’ involvement in virtual asset trading. As cryptocurrencies gain wider acceptance, establishing robust frameworks to manage their utilization by public officials becomes increasingly imperative.

Bitcoin SV (BSV) Soars 60% Amid South Korean Frenzy

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Bitcoin SV (BSV), a fork of Bitcoin Cash (BCH), has seen a remarkable price increase of over 60% in the last 24 hours. The cryptocurrency, which claims to follow the original vision of Bitcoin creator Satoshi Nakamoto, reached a new 52-week high of $92.50 on Thursday, December 28, 2023.

The main factor behind the BSV price surge seems to be the strong demand from South Korean investors, who accounted for more than two-thirds of the global trade volume. According to data from CoinMarketCap, Upbit, a leading South Korean crypto exchange, recorded BSV trades worth $520.21 million in the past 24 hours, representing a 68.23% share of the total market.

The BSV trade volume increased by a staggering 553.23% in the same period, reaching $770 million. This indicates that BSV has gained popularity among South Korean crypto enthusiasts, who may see it as a viable alternative to Bitcoin or Bitcoin Cash.

BSV 1D graph coinmarketcap
Source: CoinMarketCap

BSV Still Far from Its All-Time High

Despite the impressive price rally, BSV is still far from reaching its all-time high of $491.64, which it achieved in April 2021. Since then, the cryptocurrency has lost over 82% of its value, as it faced several challenges and controversies.

One of the main issues that BSV faced was the legal dispute between its main proponent, Craig Wright, and the estate of his former business partner, Dave Kleiman. Wright, who claims to be Satoshi Nakamoto, was accused of stealing billions of dollars worth of Bitcoin from Kleiman, who died in 2013. The case, which is still ongoing, has cast doubt on Wright’s credibility and reputation.

Another challenge that BSV faced was the lack of support from major crypto platforms, such as Coinbase, Binance, and Kraken, which delisted the coin in 2021, citing its hostile behavior and fraudulent claims. BSV also suffered from several network issues, such as low hash rate, security vulnerabilities, and spam attacks, which affected its performance and reliability.

South Korea Moves Towards Crypto Regulation

The increased interest in BSV from South Korea may also be related to the recent developments in the country’s crypto regulation. On December 27, 2023, the South Korean government announced that public officials must disclose their crypto holdings as part of a broader effort to prevent corruption and illegal activities involving digital assets.

The move was seen as a positive sign for the crypto industry, as it shows that the government is taking steps to recognize and regulate the domain rather than banning or restricting it. A regulated crypto environment may provide more security and confidence for investors, who may be more willing to explore different options and opportunities in the market.

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