Ant Group Restructuring With Implications for Blockchain

Korean Crypto Exchange Group Installs Separate Division to Prevent Money LaunderingThe Digital Asset Exchange Alliance (DAXA), a group of five major Korean crypto exchanges, announced yesterday that it has installed a division to prevent money laundering.©Pexels/Anna TarazevichAML division’s roleThe anti-money laundering (AML) division will devise suspicious transaction report types, create guidelines to assess risks at virtual asset service providers, and hold various seminars.With the new AML division installed, DAXA now has five divisions, the other four of which are responsible for trading support, market monitoring, compliance monitoring, and education.Improving listing and delisting guidelinesDAXA also plans to improve listing and delisting guidelines that exchanges can share.DAXA vice chairman Kim Jae-jin said long-term efforts are required to build a healthy virtual asset ecosystem, calling for exchanges’ stronger voluntary compliance.

Several South Korean crypto-only exchanges have long been struggling to keep their business afloat due to their prolonged weak performances. The local news outlet Etoday reported that the persistent underperformance of these local crypto exchanges is mounting pressure on their corporate operation and management, resulting in them shutting down their businesses. The situation hinders them from meeting the requirements set by the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC).  Their inability to generate sufficient revenue, due to faltering token trading volumes, makes complying with the FIU guidelines a daunting task.Photo by Anne Nygård on UnsplashCascading closure of crypto exchanges According to crypto industry insiders, local crypto-only exchanges including Cashierest, Coinbit, Huobi Korea, Probit and Tennten have announced their service closure as early as the second half of last year. On Nov. 6, Cashierest announced it was shutting down its services, with Coinbit following suit in the same month. The cascading closure announcements from crypto exchanges raised concerns about their potential harm on investors.  In an effort to protect crypto investors, the FIU has released a statement that local crypto exchanges are obliged to meet the requirements of the FIU in compliance with the Virtual Asset User Protection Act, despite their closing of services. Furthermore, the regulator said finalizing business closure requires due assessment by the FIU.  "Virtual asset service providers (VASPs) must notify their users of the closure and explain how to reclaim their assets at least one month before the business closing date. They must also support users to withdraw their assets for at least three months before closing," the FIU stated.  Struggling to meet FIU requirements However, some point out that it would be challenging for near-bankrupt crypto exchanges to run a customer service center for more than three months. Some exchanges allow users to deposit and withdraw their assets until their closure, as they would under normal conditions, but charge additional fees afterward. "It is very demanding to operate customer services when we're seeing no actual gains," one exchange official said.  It has been found that some crypto exchanges failed to register a change in their business state with the FIU, which is mandatory in the event of business location or contact changes, under the Financial Transaction Reports Act.  When Etoday reporters visited the offices of some of these crypto exchanges, they were met with empty rooms. One person who is familiar with the matter said, "The exchange has moved its office to another location and is scheduled to resume service in March." 

A couple of days have passed since the 22nd general election took place in South Korea, whose results have disappointed President Yoon Seok-yeol and the country's ruling People Power Party (PPP). The main opposition Democratic Party of Korea (DPK) won the election in a landslide, securing a total of 175 seats out of 300 in the National Assembly.   Now, with the DPK set to continue exerting control over the National Assembly, financial industry insiders are focusing on whether the liberal party will stick to its campaign pledges to ease regulations on cryptocurrencies and related products – most notably, approving investment and trading of spot Bitcoin exchange-traded funds (ETFs) within the country, according to media outlet Yonhap Infomax. Ever since the U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs in January, interest surrounding such products has intensified among Korean investors. Photo by Alesia Kozik on PexelHowever, the Korean Financial Services Commission (FSC) has been reluctant to approve such spot ETFs, citing the potential risk of such approval violating the Financial Investment Services and Capital Markets Act. Various pledges to ease crypto regulations The DPK, in response, has introduced several campaign pledges aimed at easing crypto regulations, both to win votes from younger Koreans – especially those in their 20s and 30s who make up a significant portion of crypto investors in the country – and to bolster the local crypto market. Among these pledges was to include virtual asset ETFs in Individual Savings Account (ISA), which would enhance tax breaks for crypto gains. Another notable pledge was to deduct taxes on crypto gains worth up to KRW 50 million (approximately $36,560). Under the current law, only crypto gains within the limit of KRW 2.5 million qualify for the tax deduction. One local crypto insider commented on the outcome of the general election, saying that the industry will need to keep an eye on how the situation surrounding crypto regulations develops, as easing such regulations was one of the key promises the DPK made during the election campaign period.   Still, long way ahead for Korea to approve spot Bitcoin ETFsMeanwhile, CryptoQuant CEO Ki Young Ju left a comment yesterday on the X (formerly Twitter) post written by crypto analyst MartyParty, which reads, "South Korea has approved spot Bitcoin ETFs."  Ju pointed out that South Korea still has "a long way to go" when it comes to approving spot Bitcoin ETFs, noting that just because "the Bitcoin-friendly Democratic Party," or the DPK, won the general election doesn't mean that financial regulators have approved such products.