Crypto regulation in the world: weekly digest #105

South Korea

On July 19, 2024 in South Korea the Virtual Asset User Protection Act has been enacted, which marks a significant milestone in South Korea's regulation of the cryptocurrency industry. This is one of the most innovative laws in a World that aims to protect virtual asset users' rights and interests while promoting transparent and sound trading practices.

The Act provides a comprehensive definition of virtual assets, excluding certain types of electronic certificates such as game products, electronic prepayment means, and digital currencies issued by the Bank of Korea. According to the regulation VASPs are required to implement several consumer protection measures, such as:

• Segregate users' deposited assets from their own;

• Maintain the same types and quantities of virtual assets entrusted by users;

• Take necessary measures to fulfill obligations in case of hacking or computer failures;

• Store at least 80% of customers' deposits in cold wallets.

The Act also prohibits of unfair trading practices, including use of non-public information, market manipulation and fraudulent trading activities. It is notable that the new legislation prohibits VASPs trading self-issued virtual assets or those issued by related parties.

In addition VASPs must monitor abnormal activities, report suspicious transactions to the FIU and are required to maintain records of virtual asset transactions for 15 years.

The South Korean Financial Services Commission (FSC) is granted supervisory and sanctions authority. The Act does not apply to non-fungible tokens (NFTs) or central bank digital currencies (CBDCs).

This legislation represents South Korea's first comprehensive attempt to regulate the virtual asset industry, focusing on user protection and market integrity. It builds upon existing anti-money laundering regulations and aims to address complex legal issues related to virtual assets.

India

On July 18, 2024, WazirX, a biggest Indian cryptocurrency exchange, suffered a major security breach resulting in the theft of approximately $230 million in cryptocurrency assets. The attack targeted one of WazirX's multi-signature wallets, which was operated using Liminal's digital asset custody and wallet infrastructure.

The breach occurred due to a mismatch between the information displayed on Liminal's interface and what was actually signed, allowing the attacker to replace the payload and gain control of the wallet. WazirX has filed a police complaint and engaged with the Indian Computer Emergency Response Team (CERT-In) to investigate the incident. The exchange is collaborating with forensic experts and law enforcement agencies to trace the stolen funds, recover customer assets, and identify the perpetrators.

The incident highlights the ongoing security challenges faced by cryptocurrency exchanges and the need for robust security measures in the crypto industry. This hack serves as a reminder of the importance of cybersecurity in the cryptocurrency sector and the potential vulnerabilities in digital asset custody solutions.

The UK

Britain is considering selling its Bitcoin holdings, valued at approximately $5 billion, to fund national reconstruction efforts. The new Chancellor of the Exchequer, Rachel Reeves, faces significant economic challenges and sees the sale of these seized crypto assets as a potential solution to finance her economic agenda without raising taxes.

The UK's Bitcoin stash was acquired through legal actions, including a major case against money launderer Jian Wen, whose assets were seized by the Crown Prosecution Service. This move follows a similar action by Germany, which recently sold a large amount of Bitcoin, causing a notable dip in the cryptocurrency market.

While selling the Bitcoin could provide immediate funds, it might also lead to market volatility and a potential drop in Bitcoin prices, mirroring the effects seen in Germany's market. Analysts and crypto enthusiasts are closely watching Reeves' decision, as it could have significant implications for the broader cryptocurrency market and the UK's economic strategy.

News from other countries:

• Ethereum spot ETFs are set to launch on Tuesday, July 23, 2024, marking a significant milestone in the cryptocurrency market. This launch date has been confirmed by the Chicago Board Options Exchange (Cboe) and aligns with information from multiple industry sources.

• Anatoly Legkodymov, the Russian founder and majority owner of the cryptocurrency exchange Bitzlato, has been sentenced to time served by a U.S. federal court judge in Brooklyn. Legkodymov had spent 18 months in custody, which was deemed sufficient for his sentence. He was charged with running an unlicensed money-transmitting business that allegedly facilitated illegal activities.

We continue to highlight the news of the world of crypto regulation worldwide. Please stay with us!