Thai SEC Implements Measures to Protect Crypto Investors

Korea to Tighten Scrutiny of Crypto Exchange Shareholders Amid Rising ConcernsSouth Korea’s financial regulator is stepping up efforts to evaluate the qualifications of majority shareholders of cryptocurrency exchanges, according to a report by local news outlet Newsis. This initiative follows instances where majority shareholders of local exchanges, including Bithumb, found themselves embroiled in criminal proceedings. Drawing parallels with the banking sector, the regulator is scrutinizing the credentials of majority shareholders to ensure compliance and integrity within the cryptocurrency exchange landscape.Photo by Terrence Low on UnsplashRevamping reporting requirementsThe Financial Intelligence Unit (FIU) under the Financial Services Commission recently set up a task force to revamp the reporting requirements for crypto exchanges.The upcoming requirements are anticipated to be integrated into the reporting forms that cryptocurrency exchanges must complete, starting in October of next year. Essentially, these stipulations will determine whether existing exchanges, such as Upbit, Bithumb, and Coinone, can sustain their operations in the future.Periodic evaluationAccording to the Enforcement Decree of the Financial Transaction Reports Act, all virtual asset service providers (VASPs), including exchanges, are mandated to submit a renewal report every three years. Upbit, having been the first to submit its initial report in October 2021, will join other crypto exchanges in updating their reports in October 2024.A majority shareholder qualification assessment is a process in which the government periodically checks whether majority shareholders have the necessary qualifications to operate a financial company. Through this process, the FIU aims to curb potential illicit activities by majority shareholders, who hold significant sway over cryptocurrency exchange operations, thereby mitigating any potential harm to the users.Regulatory grey areaThis measure emerged from concerns that majority shareholders of exchanges have existed in a regulatory grey area. In fact, under the Financial Transaction Reports Act, only exchange representatives and registered officers are required to report and undergo examination when declaring VASPs. This leaves the actual owners and controllers — the majority shareholders — unidentified and unexamined.The current circumstances involving VASPs are markedly different and more concerning compared to other financial sectors. In the banking sector, restrictions are placed on share ownership and voting rights if majority shareholders have breached financial laws or if they are capital entities forbidden from owning a bank. Similarly, online peer-to-peer lenders and large lenders are also under obligation to have their majority shareholders scrutinized, as they fall under analogous regulations.Fraud and manipulation allegationsThe heightened scrutiny is also thought to have been sparked by recent allegations of fraud and market manipulation involving some majority shareholders of Korean exchanges. For instance, Mr. Kang Jong-hyun, a majority shareholder of Bithumb, is currently facing a criminal trial for allegations of fraudulent and unfair trade activities under the Capital Markets Act. Additionally, Song Chi-hyung, the majority shareholder of Upbit and chairman of Dunamu, is facing a Supreme Court trial over alleged price manipulation through wash trading.Moves to amend legislationMeanwhile, efforts are underway in the National Assembly to amend the existing legislation. Yun Chang-hyun, a lawmaker from the ruling People Power Party and a member of the National Policy Committee, has recently proposed a bill to revise the Financial Transaction Reports Act. The amendment seeks to implement a majority shareholder screening system for VASPs.The proposed amendments would obligate VASPs, including crypto exchanges, to disclose information about their majority shareholders in their reports, thereby enabling the FIU to scrutinize any past financial crimes or economic offenses committed by these majority shareholders.

SC Ventures and Deutsche Bank Execute Stablecoin Payments via UDPNSC Ventures, the Singaporean disruptive technology investment subsidiary of UK banking conglomerate Standard Chartered, has partnered with Deutsche Bank in completing the first successful proof of concept (PoC) for the Universal Digital Payments Network (UDPN).Photo by Conny Schneider on UnsplashConnecting blockchain networks with CBDCsThe UDPN is a brainchild of Hong Kong’s Red Date Technology, which in turn is a co-founder of the Chinese Blockchain-Based Service Network (BSN). The PoC was aimed at facilitating seamless connections between central bank digital currencies (CBDCs) and various blockchain networks through message-based transactions.News of the successful PoC emerged via a report by India’s English-language business newspaper Financial Express earlier this week. In conventional finance and international payments, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the foremost, dominant financial messaging service. Notably, UDPN distinguishes itself from SWIFT as it operates on a permissioned blockchain, ensuring heightened security and regulatory compliance.As part of the PoC, several real-time transfers and swaps of synthetic USDC and EURS (Stasis Euro stablecoin) were executed between the two banks. While SC Ventures utilized code that leveraged UDPN software development kits (SDKs) and APIs, Deutsche Bank employed a graphical user interface. Rafael Otero, CTO and CPO of Deutsche Bank’s Corporate Bank division, emphasized the significance of this trial, stating that it provides an opportunity to explore how clients can actively engage in the decentralized global economy. Otero sees this as the logical next step in the evolution of financial transactions.Overcoming digital currency adoption challengesUDPN has been under development in collaboration with consultancy firm GFT Technologies and DLA Piper’s Hong Kong-based digital asset creation platform, TOKO, with further governance provided by the UDPN Alliance.The primary goal of UDPN is to overcome the hurdles that hinder the broader adoption of digital currencies, especially in the face of the surging number of CBDCs, stablecoins, and deposit tokens. The lack of interoperability among these digital assets necessitates innovative solutions.Currently, interoperability among stablecoins primarily relies on centralized cryptocurrency exchanges. However, due to the absence of proper oversight and regulatory framework in these exchanges, this method is not a sustainable solution for achieving interoperability between CBDCs and deposit tokens.UDPN takes a unique approach by providing a decentralized identity infrastructure. The actual currency transactions occur on their respective native blockchains or infrastructures. This means that UDPN enables users to seamlessly swap a USDC stablecoin on one network for a Euro stablecoin on another or even a bank deposit token.Improving upon financial messaging systemsAs UDPN incorporates an element of financial messaging for digital currencies, this hybrid approach streamlines transactions, eliminates the need for reconciliations, and enables atomic settlement. Therefore, UDPN ensures that either both sides of a transaction succeed or both fail. In contrast, purely messaging-based systems can result in one side of the transaction failing.SWIFT recently experimented with a messaging solution to connect CBDCs, and other conventional integration methods are being explored, involving APIs and routing networks, such as finP2P. It has collaborated with the central banks of Hong Kong and Kazakhstan recently in testing CBDC connectors.A report by Nikkei Asia last week suggested that Standard Chartered is venturing further into the world of digital currencies, particularly so in Asia, via SC Ventures.

Singapore High Court Embraces NFTs for Financial InvestigationsA recent decision by the Singapore High Court has seen it embrace non-fungible tokens (NFTs) in financial investigations. Financial investigation firm Intelligent Sanctuary, also known as iSanctuary, has been granted permission to attach NFTs containing legal documents to cold wallets linked to a hacking incident.This innovative approach, similar to the one used in Italy and the United States to deliver court summonses recently, signals a new departure in the application of NFT technology in the legal and financial world.Photo by Choong Deng Xiang on UnsplashMoving towards tokenized legal ordersLondon-based iSanctuary set out details of the court decision in a blog post published to its website recently. A pivotal moment in this scenario was the court’s issuance of a global freezing order encapsulated within soulbound NFTs, securely linked to the specified wallets. Soulbound NFTs are special types of NFTs which are tied to a user’s account. They cannot be transferred or traded.Although these NFTs do not halt transactions, they serve as powerful deterrents, notifying counterparties and exchanges about the wallets’ dubious past involvement in a hacking event.Monitoring fund movementsFurthermore, iSanctuary has unveiled an ingenious strategy to actively monitor funds leaving these wallets through the NFTs. This innovative method ensures a permanent and unbreakable connection between the NFTs and the wallets.iSanctuary recounted on its website that it was employed by a businessperson who had lost $3 million in crypto assets and was able to track the stolen funds successfully. Their method, which combines both on-chain and off-chain evidence, was presented by an iSanctuary senior investigator to the Singapore High Court. This led to the issuance of a worldwide injunction.iSanctuary’s financial and crypto investigators identified a series of cold wallets holding the proceeds of the crime, and the court approved their use of NFTs for service delivery.Mintable collaborationiSanctuary accredited Singaporean NFT marketplace Mintable as the creator of the NFTs. As reported by local news media outlet The Straits Times last week, this case revolved around a stolen private key and the alleged involvement of Singapore-based crypto exchanges in laundering the stolen assets. The fraudsters, purportedly from Singapore, are alleged to have orchestrated this saga that spans countries from Singapore to Spain, Ireland, Britain, and other European territories.Taking to X (formerly Twitter) to comment on the saga, Mintable founder Zach Burks stated:”Happy to help clean up the crypto space and move the NFT ecosystem into a realm of utility and away from the speculation of jpegs!”In a subsequent post, Burks highlighted further NFT-related innovation when pointing to a central bank digital currency (CBDC) pilot program led by Mastercard that implicated the use of NFTs to stamp out fraud. Mintable supported that particular use of the technology within that project.iSanctuary’s founder, Jonathan Benton, emphasized the impact of the recent initiative, calling it a “game changer.” The approach enables swift action, allowing for the identification of illicit asset holders and expediting the issuance of civil or criminal orders, even red flags, within hours if necessary. It also demonstrates that NFTs can be put to good use, above and beyond speculative trading.