Korean Investment Firm Partners with Open Asset to Build Security Token System

Japan’s financial authority has decided to regulate cryptocurrencies under the Financial Instruments and Exchange Act, classifying them as financial instruments. According to a report by The Asahi Shimbun, the Financial Services Agency (FSA) intends to include this reclassification in an amendment scheduled for submission during next year’s regular Diet session. Under the revised framework, local crypto exchanges will be required to provide detailed disclosures on the 105 tokens they handle. This includes the existence of issuers, underlying technologies such as blockchain, and price volatility risks. The proposed regulations will also subject these classified cryptocurrencies to insider trading rules. Issuers and individuals affiliated with exchanges will be prohibited from trading based on material non-public information, such as the suspension of trading or an issuer’s potential bankruptcy.Photo by Karola G on PexelsToken coverage in JapanAlthough the regulatory list contains 105 tokens, data from the Japan Virtual and Crypto Assets Exchange Association (JVCEA), cited in a New Economy report, indicates that Japanese exchanges currently list 119 cryptocurrencies, leaving unclear how the remaining digital assets will be regulated.  To enhance investor protection, the FSA will mandate specific disclosure requirements for issuers that use token launches for fundraising. These entities will be required to report on their latest business activities and future issuance plans annually. This legislative push follows a discussion paper published by the FSA in April, which proposed dividing crypto assets into two distinct categories. The first category includes tokens issued for raising capital, while the second comprises established cryptocurrencies that are not primarily used for issuer fundraising, citing Bitcoin (BTC) and Ethereum (ETH) as primary examples. Tax cut from 55% to 20%In parallel with these regulatory changes, the FSA plans to request tax reforms similar to those applied to traditional stock trading. Under Japan’s current tax code, taxes on cryptocurrency gains can reach as high as 55%. The agency proposes reducing this rate to a flat 20% in next year’s tax reform. Responding to the news on X, Changpeng Zhao, the founder and former CEO of Binance, welcomed Japan’s initiative to lower crypto taxes. However, he noted that the proposed 20% rate remains high compared to other jurisdictions, many of which do not levy capital gains taxes on crypto at all. Crypto ETF CFDs set to closeThe government’s move to tighten regulations is already reshaping the financial product landscape. One immediate impact is visible in contracts for difference (CFDs) linked to crypto ETFs. As reported by FinanceFeeds, IG Securities, the Japanese subsidiary of the London-listed IG Group, announced changes to its offerings. The firm will stop accepting new orders for CFDs tied to BlackRock’s iShares Bitcoin Trust and its Ethereum equivalent on Dec. 1. Open positions are scheduled to be automatically closed on Jan. 31 of next year. If clients do not settle their holdings prior to this date, the final settlement will be calculated based on the official closing price of that final day. This discontinuation adheres to an FSA decision that derivatives referencing Bitcoin or Ether ETFs must be regulated as crypto-related derivatives rather than standard ETF products. These instruments, now under the crypto-related derivative classification, fall under stricter rules regarding investor protection, operational oversight, and licensing. Japan’s latest regulatory and tax initiatives reflect a broader effort to bring clarity and investor protection to the country’s growing crypto market. As the framework evolves, the industry will be watching how the new rules influence participation and market structure. With lower taxes and stricter oversight on the horizon, both investors and exchanges may need to adjust, potentially reshaping liquidity and Japan’s overall appeal while prompting trading platforms to rethink their product offerings. 

Korean Lawmakers Make Progress on Virtual Asset User Protection BillOn Tuesday, the subcommittee for legal deliberations under the South Korean National Assembly’s National Policy Committee reached a consensus during the first review of the Virtual Asset User Protection Bill, according to Yonhap Infomax.©Pexels/Andrea PiacquadioFirst review phaseThe bill is undergoing a two-phase review process before being legislated. During the first phase, the primary focus was on safeguarding customer assets and preventing unfair transactions. The second phase is expected to concentrate on market order regulations, including the issuance and disclosure of virtual assets.Application of Capital Markets ActSeveral stipulations were included in the approved draft of the Virtual Asset User Protection Bill during the initial review phase. These stipulations include prioritizing the application of the Capital Markets Act to virtual assets that are classified as securities, while excluding central bank digital currencies (CBDCs) from the definition of virtual assets to avoid any potential confusion. The bill also seeks to impose compensatory damages and penalties for any unfair trading practices, and establish a virtual asset committee responsible for investigating any unfair transactions in the digital asset market.The virtual asset committee will also engage in preliminary deliberations regarding the management, supervision, and monitoring of the digital asset market. The committee will carry out tasks assigned to it by the Financial Services Commission (FSC). Furthermore, the Bank of Korea has been granted the right to request data from virtual asset operators since virtual assets, although not currencies, are necessary to consider when establishing monetary credit and financial stability policies.No class action systemHowever, the introduction of a class action lawsuit system was not adopted, and details about inspecting virtual asset operators will be stipulated in a presidential decree rather than a law.Second review phaseFor the second review phase, the FSC will report several matters to the National Assembly. These will involve tasks such as establishing a regulatory framework for stablecoins, security tokens, and utility tokens. In addition, the agency will be responsible for creating a regulatory system for virtual asset valuation, advisory, and disclosure services, as well as an integrated computerized system that provides reliable and reasonable information on digital assets. The FSC will also explore ways to enhance the business conduct discipline of cryptocurrency operators by commissioning research from external organizations.Additionally, the FSC and the Financial Supervisory Service will work on supporting virtual asset exchanges to establish uniform standards for the circulation supply of virtual assets. The regulatory bodies will also enforce the requirement for transparent disclosure and strict internal control on virtual asset operators. Moreover, regulations will be developed to enhance virtual asset usability and remove any obstacles that may impede the development of innovative real-life services.

Indian PM Narendra Modi Calls for Global Crypto Regulatory FrameworkAmid the rising tide of emerging technologies like cryptocurrency and artificial intelligence, Indian Prime Minister Narendra Modi has emphasized the urgent need for a worldwide regulatory framework to ensure user safety and ethical utilization.His remarks were delivered at the G20 Summit India 2023, where he stressed the importance of cohesive global efforts in shaping the future of technological advancements.Photo by Shubham Dhage on UnsplashG20 PresidencyIndia, currently holding the G20 Presidency for 2023, has taken a strong stance in advocating for the establishment of a comprehensive global regulatory framework for cryptocurrencies. Earlier this month, the country released a presidency note outlining its insights into the proposed framework.These recommendations are closely aligned with the guidelines set forth by authoritative bodies such as the Financial Stability Board (FSB), the Financial Action Task Force (FATF), and the International Monetary Fund (IMF).Notably, India’s presidency note extended its considerations beyond established economies to include provisions for developing nations relative to crypto. At the time, it was revealed that a collaborative “synthesis paper” was in the works, jointly crafted by the IMF and the FSB. This paper, set to be unveiled by the end of August, will delve into the global macro implications stemming from the adoption and growth of cryptocurrency. The timing of this release is particularly significant, coinciding with the upcoming G20 Summit scheduled for September 9.Establishing a global frameworkAddressing the G20 Summit, Prime Minister Modi articulated his vision for a world unified under a comprehensive regulatory framework not only for cryptocurrencies but also for the ethical utilization of emerging technologies like artificial intelligence. In an interview with media platform Business Today, he emphasized the reality of rapid technological progress sweeping across the globe. Instead of dismissing or wishing away these advancements, Modi underscored the need for proactive adoption, democratization, and a unified global approach.Modi’s perspective underscores his support for a harmonized global strategy when it comes to formulating regulatory frameworks for emerging technologies. Drawing a parallel with the aviation industry, he highlighted how air traffic control and air security are governed by common global rules and regulations, illustrating the effectiveness of a consensus-based model.Expanding on the implications of India’s G20 presidency, Modi shed light on the deliberations centered around cryptocurrency’s potential impact within broader macroeconomic contexts, particularly within emerging and developing economies.Regulatory needs at a national levelWithin India, various stakeholders have been struggling with the regulation of cryptocurrencies themselves. In July, the Indian Supreme Court criticized the government for its failure to establish clear crypto-related regulations. The country’s central bank, the Royal Bank of India (RBI), has been less enthusiastic about decentralized cryptocurrency, warning of the risks extended by stablecoins more recently. Instead, it has proven to be far more interested in advancing the use of permissioned blockchain networks and a central bank digital currency (CBDC).The proposition of a globally accepted set of guidelines for cryptocurrency regulation has garnered substantial support from authorities worldwide as they begin to understand the difficulty that decentralized technology presents in terms of controlling it. If Modi’s vision translates into reality, it could mark a significant step toward standardizing the governance of cryptocurrencies on an international scale.