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Many Countries Are Welcoming Traditional Financial Institutions Into Crypto — When Will Korea Catch Up?Although overseas traditional financial institutions are gradually expanding their reach into the crypto market by launching related services and products, this remains challenging for institutions in South Korea, where it is difficult for them to even invest in virtual assets.Photo by NASA on UnsplashMajor developments in other countriesAccording to industry sources, traditional financial companies such as Japan’s largest investment bank and brokerage group Nomura Group, and New York-based investment banking company Citigroup are starting to bring new crypto-related services and products to the market.Laser Digital, the asset management unit of Nomura Group, launched a Bitcoin adoption fund targeting institutional investors, according to an official press release from last Tuesday (local time), which will provide institutional investors with direct and secure access to investments in Bitcoin.Similarly, Citigroup’s Treasury and Trade Solutions (TTS) is piloting its new crypto-based cash management and trade finance service dubbed Citi Token Services, which caters to institutional clients by utilizing blockchain and smart contract technology to provide digital asset solutions. “Digital asset technologies have the potential to upgrade the regulated financial system by applying new technologies to existing legal instruments and well-established regulatory frameworks. The development of Citi Token Services is part of our journey to deliver real-time, always-on, next-generation transaction banking services to our institutional clients,” said Shahmir Khaliq, Global Head of Services at Citi.Earlier this summer, several asset managers in the US, including BlackRock, applied for a spot-traded Bitcoin exchange-traded fund (ETF) with the US Securities and Exchange Commission (SEC), drawing the interest of the industry as a whole. The SEC has been delaying its decision regarding approval for the ETF and will likely do so until its allotted 240-day review period is over, but industry experts predict that the approval will go through for several reasons including BlackRock’s implicit influence as the world’s biggest asset manager and the SEC’s former court loss against Grayscale for its review of the firm’s spot Bitcoin ETF.These developments are made possible through the commonly held opinion that the involvement of traditional financial institutions in the crypto sphere is beneficial for the industry due to their ability to increase liquidity by moving much larger amounts of capital than the crypto market alone.Moreover, many countries around the world already allow institutions to invest in virtual assets. For instance, the US Nasdaq Stock Market has already listed crypto futures-based ETFs such as Bitcoin and Ether, and there are trust products on the market like Grayscale’s Bitcoin Trust that target qualified investors. Countries like Hong Kong have also gradually begun to allow individual investments in virtual assets again, while institutional investment has always been permitted.Roadblocks in KoreaIn contrast, it remains impossible for institutional or corporate investors in Korea to invest in virtual assets, let alone offer virtual asset fund products. Although local asset managers like Mirae Asset Global Investments and Samsung Asset Management have listed Bitcoin-related ETFs in the US and Hong Kong, such products do not exist in South Korea.Korean authorities also banned financial institutions from holding, purchasing, or investing in virtual assets back in 2017 on the grounds that their investment in cryptocurrencies could stimulate investor sentiment. Also, shadow regulation after the enactment of the Act on Reporting and Using Specified Financial Transaction Information in 2021 practically bars local corporations and institutions from using crypto exchanges, though there is no provision that explicitly prohibits opening corporate bank accounts on crypto exchanges.In response to this situation, an anonymous industry insider highlighted the need for a nationwide drive to support virtual assets and Web3 technology. “This is the time to push emerging industries, and we should not overlook industry trends. The current situation is somewhat frustrating,” they said. “Japan was the most conservative country in this regard, but it has recently opened up and subsequently gained momentum. Korea should also take a more progressive approach.”

Pakistan Implements Ban on CryptocurrencyPakistan has moved to ban cryptocurrency once more, with the country’s Minister of State for Finance and Revenue, Aisha Ghaus Pasha disclosing the move last week.According to multiple local media reports within Pakistan, on May 16 Ghaus Pasha stated at a session of the Senate Standing Committee on Finance and Revenue, that cryptocurrencies are banned and “will never be legalized in Pakistan.”Photo by Hamid Roshaan on UnsplashFATF Grey ListGhaus Pasha supported this position by outlining that the Financial Action Task Force (FATF) had set the banning of crypto as a condition for Pakistan’s removal from its “Grey List.”FATF is an initiative of the G7 group of countries, first established in 1989. Its mandate is to develop policies geared towards combating money laundering, and most especially, terrorist financing. The FATF grey list includes those jurisdictions who are deemed to require increased monitoring relative to their efforts to keep money laundering and terrorist financing to an absolute minimum.Pakistan had found itself on the FATF grey list over the course of a number of years. That meant reputational damage on an international basis, together with loss of investor confidence. It also signals the likelihood of weaknesses in a country’s financial system and in its financial controls. The categorization would have had an impact on the country’s ability to access international finance, impacted trade relations, and involved increased compliance costs.Against that background, there may be a certain logic to the Finance Minister’s stance, despite it naturally being distasteful to those of us that support the development of decentralized systems, blockchain, and cryptocurrency. After an extended period on that Grey List, Pakistan was only removed from it in October of last year.Currency devaluationNotwithstanding that, governments in the developing world may have added incentives in banning cryptocurrencies. Their currencies are oftentimes unstable, and the Pakistani rupee is no exception. Cryptocurrencies like bitcoin find their greatest use case in countries that have their currencies devalued or economies that fall into the trap of hyperinflation relative to the sovereign currency.In Pakistan’s case, the rupee plummeted to a record low against the US dollar in January. Naturally, that hurts ordinary citizens and provides the conditions under which people are more likely to investigate decentralized cryptocurrencies. On that basis, we shouldn’t be surprised to learn that the Pakistani government’s decision to ban crypto was publicly supported by Sohail Jawad, Director of the State Bank of Pakistan (SBP).Pakistani banks are naturally following the government and the central bank’s lead, in implementing the ban. One circular obtained by CoinDesk stated: “As per regulatory instructions from the State Bank of Pakistan (SBP), any remittance of foreign exchange directly/indirectly outside Pakistan to overseas foreign exchange trading, margin trading, and CFD trading apps/websites/platforms through any payment channel is not allowed/permitted by SBP and such payments are inherently risky and illegal.”Community reactionNaturally enough, the crypto community internationally and locally, is not enamored by the move. However, people who have been in the space over the last few years are accustomed to ever-changing stances taken by governments as a reaction to a technology that they simply don’t know how to deal with.Waqar Zaka, a Pakistani who works within the Web3 space commented previously on a ban that was implemented in Pakistan in 2017, only later to be found to be unconstitutional. Another Pakistani community member took to Twitter in taking a stand against the decision. Others still immediately considered how they could circumvent the ban.Crypto has always benefited from jurisdictional arbitrage, and while bans are not in any way helpful, in the longer run, they will never stop the roll out and further development of this innovation.

Fasset becomes sixth crypto firm to secure VARA licenseFasset FZE, a digital asset brokerage based in Dubai in the United Arab Emirates (UAE), has successfully obtained a Virtual Asset Service Provider (VASP) license from Dubai’s Virtual Asset Regulatory Authority (VARA).This achievement, evidenced by a listing on VARA’s website on Wednesday, marks the culmination of VARA’s approval process, granting Fasset the authorization to provide broker-dealer services through its Web3-based financial services platform to a broad spectrum of clients, including both retail and institutional investors.Fasset, with a focus on practical applications of digital assets underpinned by blockchain technology, offers a range of services encompassing stable cryptocurrencies, tokenized commodities, precious metals and fiat currencies.Photo by Hongbin on UnsplashInvestcorp fundingSimultaneous with securing the VARA license, Fasset announced an upcoming investment from global investment manager Investcorp ahead of its Series B funding round, although the exact funding amount remains undisclosed. In 2022 the firm raised $22 million in Series A funding. With plans for a beta launch scheduled for this month and a full roll-out in January 2024, the startup is attempting to make an impact on the market.Mohammad Raafi Hossain, the CEO of Fasset, underscored the strategic importance of the VARA license in advancing the company’s mission to facilitate access to digital assets in emerging markets. In a post published on Thursday via the company’s LinkedIn account, Hossain outlined that this approval plays a crucial role in Fasset’s global licensing strategy, enabling seamless asset transfers across high-traffic remittance corridors, particularly from the Gulf Cooperation Council countries to Asia.Targeting emerging marketsHossain remarked:“Fasset’s focus on enabling people across emerging markets to access to digital assets is bolstered with this permission from VARA in UAE. As one of the most progressive regulatory frameworks in the world, the VARA approval is a crucial link in our global licensing portfolio, connecting places like Indonesia, Malaysia, Bangladesh, Pakistan, and Turkiye through blockchain.”The countries Hossain mentioned are precisely the markets that the firm is attempting to target. In August the firm launched an app which allows users to buy, sell and swap various cryptocurrencies with those markets in mind. Earlier in the year, Fasset had partnered with Mastercard in an effort to expand its service and product offering in IndonesiaWorking towards compliant frameworksFasset has been proactive in engaging with regulatory bodies, dating back to its establishment in 2019. The fledgling firm is now reaping the benefits of following that approach of regulatory compliance. The founding team’s prior collaboration with the UAE Prime Minister’s Office in crypto regulation laid the groundwork for compliant frameworks, something that is seen by officials as essential to the UAE’s technological progress.Dubai’s emergence as a key player in the cryptocurrency industry is evident, with an increasing number of crypto companies setting their sights on the Middle East, particularly Dubai, as a potential hub. In the month of November alone, five distinct entities, including CFI, GCEX, HEX, Crypto.com and Ripple, secured authorization from Dubai for crypto operations, showcasing the growing prominence of the region.