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South Korean Authorities Confiscate Major Crypto Exchange for Wash Trading

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The oldest newspaper in South Korea, Seoul Shinmun, reported on August 26 that the third-largest cryptocurrency exchange in the country, Coinbit, had been seized by law enforcement authorities on allegations of bloating trading volumes. According to the report, the South Korean authorities invaded the exchange offices on Wednesday morning after discovering that the platform had feigned for more than 99 percent of its trading volume.

Trade washing is a widespread practice among cryptocurrency exchanges globally. According to a Bitwise crypto management firm report back in March, more than 95 percent of the trading volumes are fake, with exchanges creating pseudo accounts and using them to trade back and forth, making the respective platforms seem more popular and active. Coinbit also used this illicit method to magnify its trading volume.

Coinbit made over $85 million in illicit proceeds

The South Korean Authorities claim that the CEO of Coinbit, Choi Mo, and his team allegedly purchased different crypto assets using fake accounts, impacting the over 250,000 active monthly users on the platform. Currently, Coinbit has discontinued all its activities, pending investigations.

Notably, the major Korean exchange managed to manipulate its trading volume by creating two accounts with all its funds. One of those accounts falsely traded the major tokens such as BTC, ETH, XRP, and USDT pairs with pseudo accounts.

On the other hand, Coinbit used the second account to trade hidden tokens and ICOs. The obscure tokens are only obtainable from one exchange, that is, Coinbit. By doing this, the major exchange controlled their supply, tampering with their valuation to inflated prices, and ultimately selling them to unsuspecting users on the platform.

South Korean authorities confines exchange’s head office

In addition to the market manipulation strategy, the wash trading scheme netted the major crypto exchange with deceitful revenue over $85 million.

Furthermore, the wash trading scheme has made the South Korean authorities raise doubts regarding Coinbit’s bookkeeping ways. This draws attention to more professional misconduct and fraud. Meanwhile, the South Korean authorities have isolated the exchange headquarters and some of its branches in Korea.

Fantom, a South Korean blockchain firm’s smart medicine project in partnership with Afghan government.

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Fantom, a South Korean blockchain firm, has officially launched a smart medicine project in partnership with the Afghan government. It is an initiative that focuses on exploring the potential of distributed ledger technology to remove counterfeit drugs from the supply chain. According to reports, the counterfeit drug industry is booming with a high inflow of counterfeit drugs on the market and nearly one billion people are dying from counterfeit drugs.

The Afghan government initiated an investigation in the drug import industry in 2017 after discovering more than 100 tons of counterfeit that contributed to the suspension of licenses for most concerned traders.

Smart medicine the ultimate solution to counterfeit drug

The project is based on blockchain, which helps the authorities to find out where the drugs are and who has handled them at any time. It will also help reduce the incidence of counterfeit drugs and improve the safety of patient medical records. Under the terms of the program, Fantom will initially track 80,000 products across four different pharmaceutical companies.
In addition Factors such as lack of consumer awareness and ineffective checkpoints have hindered efforts to combat fake drugs. They are commonly mixed with legal drugs in the chain. The Korean firm has also now established a set of major players in the pharmaceutical world, along with Nabros Pharma and Royal Star.

The project aims to monitor and deliver drugs on the market, including creams, sanitizers and chewable pills. The Smart Medicine project will boost efforts to rid the market of illegitimate drugs. Under the blockchain system, each commodity will be subject to mandatory conditions like bar code number, batch number production, expiry date, and Fda approval number, etc. Indeed, companies like Pharma will now scan labels and produce time-stamped data to form a tamper-proof audit trail. In addition, firms can now confirm the data before it is released on the market.

South Korean NGO Developing Digital Healthcare Platform on Blockchain

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South Korean non-governmental organization, the Commons Foundation, has announced its project to develop a digital health platform on the blockchain to combat pandemics following the coronavirus pandemic. According to the Digital Today report, the NGO will use blockchain public services to develop an epidemiological research system that matches the upcoming post coronavirus age.

Digital healthcare platform to use a public blockchain

Notably, the report cites the concerns expressed by the chairman of the Commons Foundation, Choi Yong-gwan, about the infringement of personal information as a result of the emergency COVID-19. This has led the South Korean NGO to develop a digital solution to the situation. As per Choi, a blockchain-based digital healthcare platform will help prevent future pandemics from having such an effect in South Korea.

According to the Commons Foundation, a public blockchain called MicroBitcoin will be used to set up a research system. The NGO noted that the robustness, security and state-of-the-art technology of MicroBitcoin were the primary considerations to prevent hackers from compromising the digital health platform.

In particular, the healthcare system will encrypt all personal data on the public distributed ledger platform in order to avoid forgery and to boost the authenticity of the data. As per the NGO, the system will provide a private key through cell phone verification and record the motions of users in the city on the blockchain-based platform.

Monitoring confirmed coronavirus cases through blockchain technology

If individual Y is confirmed to have contracted coronavirus, they can directly feed their encryption key value on the blockchain-based healthcare system and provide information that cannot be altered to an epidemiologist. Research experts can afterward plan to visit person Y and ascertain a better method to ensure a fast examination is carried out. Choi stated:
“It is important to quickly overcome the pandemic, but it will become more important in the post-corona era to protect the individual’s freedom and human rights while wisely overcoming the pandemic.”

Furthermore, Korea’s second major city, Busan, recently developed an identification system on a public blockchain to authenticate citizen information. Moreover, Korea’s Suseong University partnered with the Korea Artificial Intelligence Association, or KORAIA, to develop an AI blockchain-based campus in Daegu

South Korea’s Central Bank Forms Legal Panel to Research Digital Currency

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The Central Bank of South Korea appears to become more serious with its research into digital currency. As reported by the Korean Times on 15 June, the Bank of Korea (BOK) has set up a panel to advise on the possible regulatory obstacles in issuing a  central bank digital currency  (CBDC). The move by the bank does seem to be a step forward towards issuing a CBDC. The Central Bank said

“We established the advisory group to discuss legal issues surrounding a CBDC and figure out which laws need to be revised or enacted for smooth progress in the BOK’s possible issuance of digital currency,” a BoK official stated while speaking to Korea Times.

As per the report, the legal advisory panel consists of six law practitioners and law professors who will keep tabs on the legal framework of the central bank digital currency, if necessary. That being said, the country is not getting ready to issue digital currency any time soon.

The panel is another step in a rapid revaluation of the digital currency at Bank of Korea (BoK) in a 22-month period. Notably, in December the central bank set up a task force to study digital currencies. Instead of developing one, the task force was set up to keep an eye on what other countries are doing in terms of state-issued digital currencies.

South Korea ‘s Central Bank has recently stated that it may not be able to launch a digital currency any time soon, as the demand for fiat remains high. Irrespective of the sentiment, BoK launched a pilot test for the digital Won. The trial began in April and will take place until December next year to analyze the usability and regulatory provisions of the state-issued cryptocurrencies.

Bottom Line

The establishment of a legal advisory panel seems to be part of the overall pilot testing plan as it will only be in effect until 2021 for one year.

Notably, Governor Lee Ju-yeol of the central bank stressed the need to intensify research and innovation in state-issued digital currencies during the celebrations of BoK’s 70th anniversary. In addition, at times like these, when we need contactless payment systems more than ever, he urged the central bank and private sector to embrace digital innovations.

South Korean Officials Proposes Taxing Cryptocurrency Profits

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South Koreans may soon see their cryptocurrency proceeds slashed by the tax man.Earlier this week, South Korean officials in the Ministry of Strategy and Finance proposed taxing profits made through crypto-fiat transactions, including tokens sold by mining firms through ICO offerings. 

The regulator anticipates to submit the complete proposal in July and hand in the tax amendment to the South Korean regular assembly in September, according to a report by a local media outlet by the name Edaily. South Korea has long attempted to settle on a regulatory framework for cryptocurrencies. The proposed amendments could bring much needed clarity in the country’s cryptocurrency industry.

Currently, the South Korean law does not tax the revenue generated from cryptocurrency transactions, unlike the likes of the US, Japan, Germany, and many others who tax profits obtained from cryptocurrency dealings. Moreover, Singapore also exercises a Value added tax (VAT) on digital currency transactions, however, the South Korean officials made it clear they do not intend to go that far.

South Korean officials to tax revenue generated from crypto transactions

The South Korean lawmakers are now looking to invoke the usual ‘taxation where income is located’ rule to cryptocurrency transactions that make a profit. Furthermore, the tax will not apply if the transaction results in a net loss, but will equally tax both South Korean citizens and foreign residents.

Following G20’s recommendations, digital currencies are expected to be classified as assets as opposed to currencies. Nevertheless, not everyone is not okay with the proposed changes and the ability to effectively enforce taxation. According to a researcher at the Korea Local Tax Institute, Young Jeong:

“If you do a P2P transaction without going through an exchange, there is a possibility of avoiding taxation. Even with IP tracking, if there are a large number of targets, administrative costs will increase and it will be difficult to track each day.”

Furthermore, South Korean lawmakers are also suggesting to ban the country’s residents from using decentralized finance (DeFi) products, labeling digital currencies as high-risk assets.

South Korea Becomes Latest Country to Consider Cryptocurrency Taxation, Final Decision to be Made in September

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The cryptocurrency industry has been under the scanner of financial regulators since it first came to the limelight. With the increasing popularity of virtual assets such as Bitcoin, countries across the globe have begun to take steps to see that it is being treated as an asset under their purview.

Just recently, South Korea announced that it will join the list of countries that tax cryptocurrencies. Officials in the South Korean financial sphere have stated that taxation will always be present wherever there is a source of income. South Korea first came up with the idea of cryptocurrency taxation in 2017 but was then shelved due to implementation issues.

The South Korean Ministry of Strategy and Finance has made it clear that traders, ICOs, and mining operations will all have to tax on their profits. Officials of the finance authority shall prepare an amendment to the tax rules to ensure that cryptocurrencies are now included within the umbrella. The first announcement relating to the new rule is expected to take place in September, with regular assembly presentations planned for September.

Reports added that the Ministry of Finance also intended to consider taxes on capital gains and other taxes on income for both domestic and foreign countries. South Korean financial officials also pointed out that other countries have followed the tax model, with the US and France as main examples. A Ministry of Information and Technology said:

“We are looking at ways to tax if profits are made through transactions, mining, and public offerings (ICOs) in accordance with the principle of ‘taxation where income is located’. There are few countries that impose VAT and transaction taxes abroad, and they are not considering the introduction.”

Although the government sees taxation as a viable option, cryptocurrency experts say otherwise. The imposition of such a task becomes difficult because it is possible to avoid a legal network by carrying out interpersonal transactions. After South Korea first considered cryptocurrency taxation, 20 countries have implemented the same concept.

One of the main reasons for the slowdown is the sheer scale and complexity of the tax burden. Even the Chairman of the Korea Blockchain Association Tax Commission has confirmed that it would take at least 3-4 years for a concrete tax model to come to fruition. South Korea is also host to the world’s largest cryptocurrency exchanges. If the new tax laws are to come into effect early, it will be interesting to see how these bodies will react to the changes.

Blockchain-based Identity System for Autonomous Vehicles to be Introduced in South Korea

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The South Korean government’s test center for key smart city fixes, Sejong City, announced on May 8 that it will launch a blockchain-based identity system for self-driving cars.

According to Asian publication Aju Business Daily, the country’s Ministry of Science and ICT will oversee the creation of a blockchain-based identity system alongside the nation’s cybersecurity watchdog, Korea‘s Internet & Security Agency. Per the smart city’s spokesperson, the blockchain system will greatly enhance data integrity by reinforcing the protection of information transmitted by vehicles and their command center.

Blockchain-based identity system to curb possible replication of autonomous automobile

Despite the fact that self-driving cars are far from being orthodox, Sejong smart city has so far commenced preparations to curb crimes linked to such technological expansion. The tech arm of the LG group, LG CNS, will collaborate with a Korea-based self-driving shuttle maker and the administration of the Sejong smart city to create an encrypted identifier called the Decentralized Identifier or DID. 

DID could aid in averting replication of autonomous vehicles and hacking into their system. As per the dispatch, the blockchain-based identity system will base several blankets of encryption to the information being transmitted between vehicles and the facilities on highways with the help of  “vehicle-to-everything”, or V2X, communication.

South Korea is at the forefront of blockchain-based innovations

The administration of the Asian country has displayed a huge interest in the blockchain technology and its deployment in key sectors in the economy. Last month, South Korea’s administration declared that tech as a “golden opportunity” and advocated for commercial enterprises to adopt it in future developments and innovations.

Despite championing blockchain technology, the country’s administration was formerly unsettled on digital currencies, it has displayed compatible attempts to vindicate digital currencies and establish a suitable regulatory framework.

South Korean Police Calls Upon Upbit, Bithumb, Korbit and Coinone to Help in ‘Blue House’ Investigation

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Cryptocurrency companies usually come under pressure from legal departments for the way they work. After the advent of Bitcoin over a decade ago, the industry has always been locked in a battle with authorities around the world.

This time, however, the South Korean police have called upon the services of cryptocurrency exchanges in the country to track ransom money for the infamous ‘Blue House’ incident. Upbit, Bithumb, Korbit, and Coinone are the four exchanges that will directly assist the police.

Four cryptocurrency exchanges said they will do all they might to help track down the 6.5 billion won that was received in the form of payment. The South Korean public has risen in chaos ever since it was announced that a small group of people had access to thousands of illicit sexual content.

Reports claimed that 1.8 million people had signed a petition asking the presidential Blue House to release the identities of the group chat network where the videos were posted.

A majority of the capital was transferred via cryptocurrencies with one confirmed member, Zhao Zhuobin, bagging almost 3.3 billion himself. The rest of the 3.2 billion is yet to be converted into fiat currency. Upbit, Bithumb, Korbit, and Coinone have said that they would also help in tracking the users who transferred the capital to the owner of the chat room.

South Korean Media has said that the Blue House chat room had over 260,000 members, some of which were non paying. The public outcry also resulted in the National Police Agency releasing the culprits’ identity: Cho Joo-bin. He was indicted for allegedly blackmailing at least 74 women, including 16 minors into creating videos of themselves. They were then asked to upload the videos to the chat room, where it was made available to paid members.

According to the South Korean Police his “malicious and repetitive criminal method that forced sexually abusive videos out of women whom he labeled slaves” should never be seen in the country again. The agency added:

“We decided to release his name, age and face after reviewing how it would serve the public interest regarding the people’s right to know and the prevention of similar crimes from recurring“

The accused worked using the alias “Doctor” and posted the videos on Telegram to the exclusive group of people. According to some claims, the accused charged almost $1200 in crypto per person. Essentially, this money was the entry fee for the Telegram group. Min Gap-Ryong, NPA Commissioner-General, acknowledged that the culprit had ruined the lives of several innocent citizens.

Police in South Korea were now on a warpath to uproot such practices from society. Currently, 124 suspects were being tracked down in relation to this case. South Korean police added that 18 people were arrested since last year in relation to sexual-abuse crimes.

 

Interpol Enters Deal With South Korea’s S2W Lab Over Cyber Threat Intelligence Data

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With the growing development of the digital asset universe, it is common to expect that illicit activities in the dark web will intensify. Over the past years, major cyber-crime and criminal activities have been carried out over the darknet, causing serious damage to financial institutions and individuals around the world.

Now, according to a recent press release, S2W Lab, a South Korean start-up has agreed and signed an official agreement with Interpol over the security of the online networks.

The French-based International Police Organization has entered into an agreement on the start-up of data intelligence to share information on cyber threat intelligence. After the announcement, Suh Sangduk, CEO of S2W Lab said,

“Cybercrime of dark web is hard to track due to its characteristics and wide usage of crypto-currencies and this is where S2W lab specializes in offering a technology which will help the Interpol to mitigate cyber threats prevailing on the dark web landscape”.

Launching back in 2018, S2W Lab is a company with expertise in the extraction and capture of large amounts of key data related to the Dark Net. Tracking data over the Darknet is an extremely tedious task, and police agencies around the world have a number of cybersecurity offices set up to track the offender’s trails.

The above agreement would ease the load on Interpol, as the S2W Lab will reduce the difficulty of filtering the data connected to the targeted individuals that are consistently active on the dark web.

Cyber-Crime in Crypto

Cryptocurrencies are a traceable form of digital assets, and one would assume that criminals would probably stay away from such medium of exchanges. The assumption couldn’t be more wrong.

Earlier in late January, Chainalysis had released a report that revealed that despite Bitcoin’s centralized network, the digital currency continued to register a higher volume of transactions that were linked to the darknet and possible illicit activities.

By the end of 2019, Bitcoin was used to conduct transactions worth over a whopping $601 million.

Jonathan Levin, Chainalysis Co-Founder, said,

“so the darknet markets are definitely evolving in their business models and how they store cryptocurrency that typically if they want to be able to access a large audience of buyers. The vendors, themselves, are still accepting Bitcoin because that’s where the majority of users are still comfortable to spend their cryptocurrency.”

Additionally, the Co-founder also added that crime-related to other digital assets was significantly less, with Bitcoin being the favored digital asset in the Dark Web.

Chainalysis Head of Research, Kimberly Grauer spoke about cryptocurrency money-laundering and believed that over the years, an estimated $2.5 billion in Bitcoin-related illicit activities were transferred to several exchanges.

Major exchanges such as Binance and Huobi were in the mix, with Binance accounting for a share of 27.5 percent.

South Korea Pushes For More Cryptocurrency Adoption With New Taxation Laws

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 Cryptocurrency adoption has been on the rise in recent weeks and the countries of South Asia have been at the forefront. Reports have shown that developments in Asia have surpassed that in the US, with proponents betting on China and South Korea.

South Korea’s recently reported that it had taken significant steps to integrate cryptocurrencies into its economic systems after providing amendments to its economic framework. 

The country claimed that it would step up efforts for cryptocurrency taxation after the National Assembly passed a new revision. The amendment will be made to the Reporting and Using Specific Financial Transaction Information Act, with the aim of putting the cryptocurrency industry under government regulation.

Cryptocurrency companies will now be asked to take anti-money laundering measures and conduct their business on the basis of real-name accounts.

South Korea has stated that any exchange that does not comply with the stipulated rules will be banned from operating in that country If the registration is not carried out, the State has the right to sentence owners to up to five years in prison

Apart from jail time, cryptocurrency exchange heads may also be asked to pay 50 million Won or $42,000.  One of the other main agendas of the new revised law is to establish a solid playing ground for cryptocurrency taxation.

All details about the cryptocurrency taxation laws will be released in July. At the same time, the Korea Blockchain Association would survey market participants and deliver their findings to the tax authorities.

The government has also asked the officials heading the cryptocurrency companies to function on real-name accounts. Korea is one of the few countries that has seriously considered cryptocurrency as a legitimate form of transaction and the tax plan is seen as a first measure.

The country’s move towards cryptocurrency taxation stemmed from the Bithumb issue back in December 2019. Last year, the National Tax Service incited a massive controversy by filing an 80 billion won tax on Bithumb.

This led to multiple proponents of the cryptocurrency industry to believe that they were being treated unfairly. Bithumb had retaliated to the ban by stating that there were no legal provisions for crypto to be taxed in the country.

A member of the Korea Blockchain Association said that they will be holding a series of debates on cryptocurrency soon and that there will be input from multiple sectors of the decentralized industry. At the moment, there were only four exchanges that adhered to the rules proposed by the Blockchain Association. They were Upbit, Bithumb, Coinone, and Korbit.