Crypto regulation in the world: weekly digest #83

South Korea

The Financial Services Commission (FSC) of South Korea has proposed amendments requiring new executives of crypto projects to get regulatory approval before they start working in crypto companies. The proposal aims to give the FSC the authority to screen executives joining crypto companies. If enacted, the law would compel crypto firms to report changes in personnel to the financial regulator. With this, executives would not be able to start their jobs unless the FSC approves their personnel change report. The amendment is expected to go into effect by the end of March 2024 after going through several procedures, including a review from the Ministry of Government Legislation and a resolution by the FSC.

South Korea is consequently stricting the country’s crypto rules. In 2023 the country has introduced new penalties for financial crimes involving cryptocurrency. The Virtual Asset User Protection Act, which came into effect on July 19, 2023, aims to eradicate illicit market acts, such as using undisclosed information for crypto investments, manipulating market prices, and engaging in fraudulent transactions.

The new law imposes criminal punishments, including life imprisonment, for crypto criminals committing illicit market acts. Violations of the new crypto law could lead to at least one year of imprisonment or fines ranging from three to five times the amount of illegal gains. Individuals who earned over 5 billion Korean won ($3.76 million) from such violations could face a life sentence or a penalty of double the proceeds.

Japan

Japan's Financial Services Agency (FSA) has suggested measures to protect users from unlawful transfers to cryptocurrency exchanges, including a proposal to halt peer-to-peer (P2P) transfers from fiat to crypto if the sender's name does not match the account name. This recommendation, which is not a mandatory requirement, could significantly disrupt the P2P market, as the names of the sender and receiver on the fiat and crypto ends of transactions are typically different.

The FSA's proposal is part of a broader effort to strengthen user protection in response to the high number of fraudulent transactions involving crypto assets. The regulator has also encouraged banks to further strengthen their monitoring of unlawful transfers to crypto-asset exchange service providers. Earlier, the Japanese government has also proposed tax regulations that would exempt businesses from paying taxes on their cryptocurrency holdings' unrealized gains, but this bill still needs to be approved by both chambers of the Japanese parliament.

USA

The U.S. Financial Crimes Enforcement Network (FinCEN) recently issued a Financial Trend Analysis report that reflects an increase in Bank Secrecy Act (BSA) reporting associated with the use of convertible virtual currency (CVC) and online child sexual exploitation and human trafficking.

The document is based on BSA reporting filed between January 2020 and December 2021. The total number of child abuse and human trafficking-related BSA reports involving virtual currency increased from 336 in 2020 to 1,975 in 2021. BSA filers specifically reported child sexual abuse material (CSAM) or human trafficking and CSAM in 95 percent of the reports involving virtual currencies.

Bitcoin was overwhelmingly identified as the primary crypto currency used for thise illicit activities, however, this does not necessarily mean that other types of tokens are not used for such crimes.

FinCEN has also identified four typologies that describe common trends within BSA reports related to chinls abuse and human trafficking. The analysis detailed in this report furthers Treasury efforts to combat human trafficking as well as the illicit uses of virtual currency.

Always remember that when receiving cryptocurrency it is necessary to check the address from which it is sent to you and the source of its origin! Otherwise, you can become a glamour of tokens with criminal origin.

News from other countries:

• The National Banking and Securities Commission (CNBS) of Honduras has issued a resolution banning the country’s financial institutions from handling cryptocurrencies, including virtual currencies, tokens, and any other similar virtual asset. The resolution stated that users of cryptocurrencies and financial services based on blockchain technology may be exposed to fraud and operational and legal risks, and that crypto assets are also liable to be used for fraud, money laundering, and financing terrorism.

• Ethiopia has signed a preliminary agreement with a subsidiary of Hong Kong-based West Data Group to develop infrastructure for data mining and artificial intelligence training operations. The partnership, valued at $250 million, aims to pioneer sophisticated data mining and artificial intelligence training facilities within Ethiopia.

• The Philippines central bank, Bangko Sentral ng Pilipinas (BSP), plans to introduce a wholesale central bank digital currency (CBDC) within the next two years, according to Governor Eli Remolona. The CBDC will operate on a payment and settlement system owned by the central bank, but will not use blockchain technology.