SEC Opposes Motion to Dismiss Terraform Labs Lawsuit

Korean Parliament to Hold Hearing on Virtual Assets Amid ControversiesThe National Policy Committee (NPC) of the South Korean National Assembly has reached an agreement to conduct a hearing on virtual assets next month. This decision comes following discussions between the ruling and opposition parties, as reported by local news outlet Kukinews.Photo by KS KYUNG on UnsplashHearing dateLawmakers Yoon Han-hong and Kim Jong-min, who serve as administrative secretaries of the NPC, have agreed today to hold the virtual assets hearing on July 11. Yoon is a member of the ruling People Power Party (PPP), and Kim is a member of the opposition Democratic Party of Korea (DPK).During a full session held this afternoon, Lawmaker Kim proposed the idea of a hearing on virtual assets, to which NPC Chair Back Hye-ryun agreed.Growing public interestToday’s meeting was organized to foster a better understanding of the current issues surrounding virtual assets, given the increasing public interest, particularly in light of the recent controversy involving Lawmaker Kim Nam-kook’s alleged ownership of cryptocurrency tokens and the employment of PPP leader Kim Gi-hyeon’s son in a crypto-related company.The NPC intends to finalize the plan for the hearing on June 30, just before the plenary session on the day. The specific focus of the hearing and the participants, including witnesses, will be determined through consultations between the administrative secretaries.

The Need to Distinguish Between Security and Non-Security Virtual AssetsWith the recent enactment of the Virtual Asset User Protection Bill in South Korea, there is a need to lay out criteria for determining whether virtual assets qualify as securities, says Kim Ja-bong, a senior research fellow at the Korea Institute of Finance, in his report titled “The Implications of Determining Which Virtual Assets Constitute Securities and Investor Protection” released on Saturday.Photo by Shubham Dhage on UnsplashThe implications of the Virtual Asset User Protection ActThe Virtual Asset User Protection Act — which will take effect in July of next year — aims to protect customer assets, establish regulations against unfair trading practices, and enforce penalties. Notably, it will target virtual assets that are not securities, deeming it necessary for regulators to determine if virtual assets qualify as securities or not in order to enforce the bill. Assets with characteristics of securities will fall under the jurisdiction of the Capital Markets Act.Therefore, if the Virtual Asset User Protection Act does not provide sufficient investor protection, issuers may be incentivized to issue non-security assets rather than security assets to avoid the regulations of the Capital Markets Act. This further necessitates the act of distinguishing between virtual assets that are securities versus those that are not.Determining if a virtual asset is a security or notThere are two approaches to do this, according to Kim: the passive approach, which avoids considering a virtual asset as a security whenever possible, and the active approach, which treats a virtual asset as a security whenever applicable.He argues that it is better to focus on whether an investment contract qualifies as a security if it is considered an investment contract, rather than simply selecting a specific approach.Furthermore, the nature of virtual assets renders them unbound by national borders, so it is necessary to establish assessment criteria that correspond with international standards, such as those used in the US and Europe.This is especially important because if the criteria differ from international standards, there is a risk of domestic investors suffering damages due to an issuer’s pursuit of regulatory arbitrage between countries.Equitable recognition and potential for security tokensAccording to Kim, the importance of determining whether virtual assets are securities lies in ensuring that security tokens receive the same recognition and trading treatment as traditional securities such as stocks. With such a measure, security token offerings can serve as an efficient and reliable method for raising funds. Although there may be concerns that such a regulation may hinder the development of virtual assets, it may well be an opportunity for security tokens to be qualified and trusted as high-quality financial instruments just like existing securities, Kim claims.Even for virtual assets that are not considered securities, there are many types of assets that are financial in nature, such as e-money tokens — therefore, it is necessary to actively protect investors in non-security virtual assets through financial regulations such as reinforcing disclosure obligations, which is being done in the EU through the Markets in Crypto-Assets Regulation (MiCA).Empowering regulators for enhanced investor protection and market integrityKim underscored that investor protection and healthy growth of the virtual asset market are made possible mainly through expanding regulators’ authority to protect economic interests and prevent damages. The author also suggested institutional reforms that grant regulators substantial authority, which would enhance their ability to protect investors effectively and provide compensation for damages.He added that regulators should also have the authority to enforce liability for damages or impose civil penalties for unfair trading practices conducted using classified information.

Modhaus attracts $8M in advancing blockchain-based K-pop fan engagementModhaus, a South Korean Web3 startup focused on blockchain-driven K-pop promotion, recently announced that it has raised $8 million in Series A funding, according to a report by local news outlet Maeil Business Newspaper. This latest funding round brings the company’s total investment to over $12 million.Photo by C D-X on UnsplashKey investorsThis Series A funding was led by Sfermion, a Chicago-based venture capital firm focused on non-fungible tokens and the immersive internet. The investment round also saw participation from various investors, including SM Culture Partners, Laguna Investment, the KDDI Open Innovation Fund, Foresight Ventures, Reflexive Capital, NFT song collector Cooper Turley, Quantstamp CEO Richard Ma and Playco CEO Michael Carter.Modhaus had previously attracted investment from other players in earlier funding rounds. These included UNOPND, a venture division of Web3 venture capital firm Hashed; Naver D2SF; CJ Investment and Futureplay.Digital photo cards and tokensDoubling as an entertainment agency, Modhaus operates Cosmo, an app that empowers fans to play a role in their favorite artists’ operations. Through Cosmo, fans can purchase digital photo cards, earning tokens in return. These tokens then allow fans to vote on various aspects of their artists’ activities. The use of blockchain technology ensures that all votes are transparently and securely recorded, boosting the fan-artist relationship.Sfermion’s general partner, Dan Patterson, expressed enthusiasm about their investment in Modhaus, explaining that it “has innovatively bridged the K-pop fandom with both tangible and digital realms through NFTs. [The new] investment signifies more than just financial backing; it’s a venture into melding the energetic world of K-pop with the expansive narrative of the metaverse.”Jaden Jung, CEO of Modhaus, said, “K-pop fans possess keen insights. With their sharp eyes for talent and trendspotting, we aim to enhance artist value through amplified fan involvement.” He emphasized the crucial role of fan engagement in the entertainment industry, pointing out that Modhaus is dedicated to elevating this aspect to new heights. He referred to the achievement of girl group TripleS, which has garnered 1.74 million subscribers on YouTube since its debut in February of this year, as an example of what they envision for Cosmo. He suggested that Cosmo has the potential to evolve into a platform akin to LinkedIn or Kickstarter within the K-pop sector, aiming to maximize the value and reach of artists.Deepening artist-fan connectionsModhaus seeks to use the funds raised from this recent investment round to advance its Cosmo platform. This improvement aims to deepen the connections between fans and artists, providing fans with more opportunities to actively engage with and contribute to their favorite idol groups.At the helm of Modhaus are co-founders Jaden Jung and Kwanghyun Joseph Baek. Jung brings over two decades of experience as a producer at JYP Entertainment and Woollim Entertainment. Baek, on the other hand, has a background as the Chief Operating Officer at Playlist Originals, a digital content studio, and as a consultant at Bain & Company.Their team also includes Chief Product Officer Park Jae-hyun, formerly Product Owner at Viva Republica, the fintech company behind the internet-only bank Toss. Chief Creative Officer Kim Jong-soo has a history in the music industry as well, having produced girl groups like Dreamcatcher and Dal Shabet. Chief Business Officer Lee Gyu-hwa comes from MyMusicTaste, a K-Pop platform, while Chief Financial Officer Yang Ji-eun brings her experience from venture capital firm NCORE Ventures.