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The recent 19b-4 approval of spot Ethereum exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) is putting pressure on South Korean financial regulators to revisit their policies on digital assets. The SEC's decision to allow ETFs for Ethereum, the world's second-largest cryptocurrency, on May 24, 2024, follows its earlier endorsement of Bitcoin ETFs in January 2024. This move is seen as a significant step in merging traditional finance with the digital asset sector.Photo by DrawKit Illustrations on UnsplashKorean regulatory cautionIn contrast to the progressive stance in the U.S., the Korean Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have maintained a cautious approach regarding the integration of crypto assets into traditional securities markets. According to current regulations under the Capital Markets Act, ETFs in Korea are limited to traditional underlying assets such as financial instruments, securities, international currencies and commodities. These foundations are crucial for the creation of financial derivatives, leaving little room for digital assets under current laws. Calls for regulatory reforms and market implicationsThe decision by the SEC is expected to influence the Korean regulators to update their views on digital assets, according to local media and industry experts. Jung Eui-jung, the head of the Korean Stockholders’ Alliance, has advocated for Korea to emulate the U.S. by approving Bitcoin and Ethereum ETFs. He expressed concerns that continued regulatory hesitance could lead to investor funds migrating to more progressive markets like the U.S., potentially positioning the U.S. to broaden its crypto market further. Xangle, a digital currency data provider in Seoul, has also criticized the current regulations as outdated, emphasizing the need for revisions to accommodate the increasing relevance of digital assets in global finance. 

Well-known crypto exchange HTX and its decentralized autonomous organization (HTX DAO) have restored services following a distributed denial-of-service (DDoS) attack. The attack, which occurred late last week, briefly disrupted operations. However, HTX swiftly addressed the issue, highlighting the robust security protocols in place. The Seychelles-incorporated exchange confirmed the outage on social media last Friday, only to post an update shortly afterwards to confirm that service had been restored.Photo by Tekton on Unsplash‘Funds are SAFU!’Key industry figure and HTX advisor Justin Sun also took to social media to announce the recovery and express gratitude to the user community for their support. He reassured users that all funds remained secure, underscoring the exchange's dedication to safeguarding user assets. Sun borrowed a phrase first coined by Binance founder Changpeng Zhou (CZ), stating:”All funds are SAFU!” Latest in a string of incidentsThis DDoS attack adds to a series of challenges faced by HTX. In September, the same month in which the company rebranded from Huobi to HTX, hackers exploited the exchange, resulting in a loss of approximately 4,999 ether (ETH) valued at $7.9 million. In November, two Sun-linked protocols, HTX and Heco Bridge, experienced a combined $100 million hack. Despite these incidents, prompt measures, including statements from Justin Sun, ensured the protection of user assets. Having originated in 2013, HTX has evolved into a comprehensive blockchain ecosystem, encompassing digital asset trading, financial derivatives, wallets and various other blockchain-related services. The firm maintains offices in Hong Kong, Singapore, Tokyo and the United States. Its South Korean branch is set to close its operations on Jan. 29. Since 2018 the business has been a publicly listed company on the Hong Kong Stock Exchange (HKEX). HTX DAOOnly hours before experiencing this DDoS attack, the firm had launched HTX DAO. The DAO allows users to actively participate in the exchange's operations. Users can contribute to decision-making processes through voting, engaging in community discussions and selecting representatives. The DAO’s whitepaper outlines that governance will be conducted through the use of HTX tokens. The HTX DAO website alludes to various privileges that HTX token holders can benefit from on both the DAO and the HTX exchange. However, it remains unclear as to the specific nature of these privileges as yet. In a bid to strengthen its security infrastructure, HTX DAO recently underwent a comprehensive security audit conducted by ChainSecurity. This integration of the exchange business into the HTX DAO ecosystem reflects a broader trend within the cryptocurrency sector towards decentralization. In a long post on the X social media platform on Thursday, Justin Sun suggested that through HTX DAO, the HTX exchange would become “The People’s Exchange.” Sun added:”HTX currency holders should eventually become the owners of the platform.” Despite the high hopes and aspirations, Sun continues to have his perennial detractors. Travis Kling, founder of Ikigai Asset Management, posted on X on the very same day, stating:”We may be getting close to showtime here. We need [Justin Sun] gone. He’s a cancer.” 

Dubai Regulator Issues Reprimand to OPNX FoundersThe Virtual Assets Regulatory Authority (VARA), the regulator that concerns itself with the digital assets market in the Emirate of Dubai, has formally reprimanded the founders of digital asset exchange OPNX.Photo by Kai Pilger on UnsplashVARA issued an investor and marketplace alert on April 12 to inform investors that OPNX was not a licensed entity regulated by VARA and with that, it urged investors to be cautious. The regulator has now gone one further, this time formally writing to OPNX’s founders to reprimand them.The statement cites the following rationale for the issuance of the reprimand:”Carrying out VA (Virtual Asset) Exchange Services on an unregulated basis in and from the Emirate of Dubai; and Marketing, promoting and/or advertising OPNX services and its native token [FLEX] without the necessary permits from VARA.”Contextual backgroundThe statement goes on to provide the context for the regulator’s most recent action. VARA became aware of OPNX soliciting the public to use the exchange in February of this year. It noted that the business was actively marketing through various social media channels “without establishing warranted restrictions for residents of Dubai/UAE.” VARA went on to explain that OPNX commenced trading in April without having secured a regulatory license despite the activity warranting such a license.Cease and desistOn February 27, VARA issued OPNX with a cease and desist order, relative to the foundation of the business and the marketing and promotion of services. Thereafter, the exchange applied certain restrictions but the regulator deemed the measures to not have been applied comprehensively across all OPNX communication channels, prompting it to issue a further cease and desist order the following month.The investor and marketplace alert followed in April as OPNX proceeded to launch its exchange. The written reprimand was then issued on April 18, “to address historical and ongoing activity conducted on an unregulated basis.” The recipients included the OPNX founders, (Mark Lamb, Sudhu Arumugam, Kyle Davies and Su Zhu) and the firm’s CEO Leslie Lamb.Given what the regulator deems to have been “a continued lack of satisfactory remedial action [taken] by the responsible parties,” it is continuing to actively monitor the situation. VARA stated that it will further investigate OPNX’s activity to assess further corrective measures that may be required to protect the market.Lack of industry supportThe digital assets industry is in no way enamored with founders Davies and Zhu. Their record has been badly blemished by the unceremonious collapse of their crypto hedge fund, Three Arrows Capital, in 2022. That failure wreaked major damage on the overarching crypto space, directly leading to the failure of other crypto businesses later that year.Prominent crypto venture capitalist Michael Arrington said of their capital raise for OPNX that it was “the saddest bulls**t I’ve heard in a long time.” It later transpired that two of the investment firms that OPNX suggested were backing the start-up refuted the claim.In response to this latest development, OPNX’s CEO Leslie Lamb told Blockworks that the business was initially launched in Hong Kong. “To confirm, we have no Dubai or UAE customers and do full KYC on all users,” she stated.