Crypto regulation in the world: weekly digest #128

China

China has recently implemented stringent new regulations targeting cryptocurrency transactions, significantly impacting how banks operate concerning digital assets. The State Administration of Foreign Exchange has mandated that banks in mainland China must closely monitor and report any transactions deemed «risky», particularly those involving cryptocurrencies. This includes identifying underground banking activities, cross-border gambling, and other illegal financial dealings related to digital currencies.

Banks are now required to track various details related to transactions, such as the identities of individuals and institutions involved, the sources of funds, and the frequency of trades. Financial institutions must implement risk-control measures that may limit access to certain services for clients engaged in risky transactions.

The new regulations are expected to make it significantly harder for Chinese investors to buy and sell cryptocurrencies. The heightened scrutiny means that any suspicious activity could lead to restrictions or penalties for users involved in such trades. Legal experts suggest that these new rules provide a stronger legal foundation for punishing cryptocurrency trading activities, reinforcing the government's commitment to a strict regulatory environment around digital assets.

China's approach to cryptocurrency has evolved dramatically over recent years, transitioning from a relatively permissive stance to one of stringent regulation. This latest crackdown is part of a broader effort by Chinese authorities to mitigate perceived risks associated with cryptocurrencies, which they view as threats to financial stability. Despite these measures, there is a recognition of Hong Kong's more progressive regulatory framework regarding crypto, indicating a nuanced approach within different regions of China.

South Korea

Recent developments in South Korea's regulatory landscape for virtual assets have introduced new changes aimed at enhancing user protection. The Act on the Protection of Virtual Asset Users (VAUPA), originally promulgated on July 18, 2023, came into effect on July 19, 2024. This law is designed to create a framework for the virtual asset market that prioritizes user protection and market integrity.

On January 3, 2025, South Korean lawmaker Kim Hyun-jung proposed amendments to VAUPA to further strengthen protections for users of digital assets. The proposed changes focus on increasing transparency and accountability among virtual asset service providers (VASPs). These amendments would require VASPs to promptly report any incidents that could disrupt their services, such as hacking or system failures, and to provide real-time updates on their websites during such events.

The VAUPA mandates that VASPs must:

• Protect users' deposits by maintaining separate accounts.

• Enroll in insurance or mutual aid programs to cover potential losses from incidents like hacking.

• Retain transaction records for a minimum of 15 years.

The law prohibits various unfair trading practices, including market manipulation and the use of nonpublic information. It also requires VASPs to monitor and report suspicious activities to regulatory authorities.

These developments represent a significant step towards establishing a safer and more transparent environment for virtual asset users in South Korea.

Jordan

Jordan has recently approved its «2025 Blockchain Technology Policy», a significant initiative aimed at modernizing government operations and enhancing public trust. The policy, endorsed by the Jordanian Council of Ministers, focuses on several key objectives:

• Enhancing Government Services: The policy aims to improve the efficiency and transparency of government services, thereby increasing citizen confidence in governmental operations.

• Data Security and Privacy: A critical aspect of the policy is the emphasis on ensuring the security and privacy of citizen data, addressing growing concerns about digital protection in an increasingly tech-driven world.

• Cost and Time Reductio: By implementing blockchain technology, the government seeks to streamline administrative processes, which is expected to reduce both the time and costs associated with government transactions.

• Support for Startups and Skill Development: The policy includes provisions to support blockchain startups and develop specialized skills within the workforce, fostering a tech-savvy environment that can drive further digital transformation.

This initiative is part of Jordan's broader «Economic Modernization Vision», which aims to enhance competitiveness across various sectors and improve service delivery. By leveraging blockchain technology, Jordan hopes to combat fraud, reduce operational costs, and ultimately contribute to economic diversification and growth in the digital economy.

In response to the growing global adoption of digital currencies, Jordan is working towards integrating cryptocurrencies into its financial regulatory framework. This includes efforts to legally recognize cryptocurrencies as digital assets, which would allow for more targeted regulatory measures such as taxation and compliance requirement. Moreover, Jordan has implemented strict regulations for cryptocurrency exchanges and wallet providers, requiring them to register with financial authorities and adhere to high standards of security and transparency. This regulatory compliance is part of a broader strategy to protect consumers and prevent financial crimes such as money laundering.

News from other countries:

• The transition of cryptocurrency oversight in Indonesia from the Commodity Futures Trading Agency (Bappebti) to the Financial Services Authority (OJK) is facing significant delays. Initially scheduled for completion by January 12, 2025, the handover has been postponed due to a lack of supporting government regulations necessary to formalize this transition.

• Do Kwon, the co-founder of Terraform Labs, has pleaded not guilty to multiple fraud charges in a U.S. federal court. This plea was entered during his first court appearance on January 2, 2025, following his extradition from Montenegro. Kwon faces a total of nine charges, including securities fraud, wire fraud, commodities fraud, conspiracy, and a newly added money laundering charge related to the collapse of the TerraUSD stablecoin and its associated cryptocurrency Luna, which resulted in approximately $40 billion in losses for investors.

• The MiCA regulation in the European Union officially went live on December 30, 2024, marking a significant development in the regulatory landscape for cryptocurrencies. This comprehensive framework aims to provide a standardized approach to crypto-assets across the EU, ensuring consumer protection and regulatory certainty for businesses operating within the bloc.

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