BOK Staffers Assess Crypto Market Vulnerabilities and Their Implications

The Inland Revenue Board (IRB) of Malaysia has launched an operation, which has been dubbed as “Ops Token,” to tackle tax evasion within crypto trading circles in the southeast Asian nation. Klang Valley raids According to the Malaysian English language newspaper, The Star, the special operation is a coordinated effort involving the Royal Malaysia Police and CyberSecurity Malaysia (CSM) alongside the IRB. The Malaysian tax authority raided ten locations, with 38 personnel involved in the raids, which were carried out within the Klang Valley region. The main objective of the raids and the operation overall, is to identify crypto corporate entities and individuals that had failed to report trading activities and therefore, associated revenues, profits and taxes. The initiative aligns with the Malaysian government’s broader strategy of stamping out tax evasion across all sectors, reducing revenue leakage and optimizing the nation’s tax take.Photo by Esmonde Yong on UnsplashStern warning for traders Datuk Abu Tariq Jamaluddin, CEO of the IRB, issued a stern warning to crypto traders: declare and pay taxes or face compliance actions. Jamaluddin clarified that crypto traders are subject to the same income tax rules that are applied to businesses across various sectors throughout Malaysia. While cryptocurrency is not regarded as legal tender by Malaysia’s central bank, crypto-centric businesses must adhere to the nation's income tax regulations. The IRB commented on the operation via a statement published on June 15. It stated: "Through this operation, it was possible to find stored cryptocurrency trading data in mobile devices and computers. We have successfully identified the digital assets that are traded, which has caused significant tax revenue leakage." The agency intends to carry out further analysis on the data that it seized in a bid to ascertain the trading revenues generated, the profits derived from that trading activity and the taxes owed as a consequence. The IRB has asserted that a number of corporate entities and partnerships were specifically formed with the purpose of tax evasion. The agency estimates the total value of crypto-related transactions to date in 2024 to amount to 1.441 trillion Malaysian ringgits, approximately $310 billion. International enforcement efforts Malaysia is not alone in its efforts to ensure tax compliance relative to cryptocurrency trading and investing. The Organization for Economic Cooperation and Development (OECD) has established a set of crypto tax rules, namely the Crypto-Asset Reporting Framework (CARF). The initiative is part of an effort to achieve a Common Reporting Standard (CRS) relative to crypto on an international basis, with OECD member states transposing the CARF into domestic law. The CARF is due to go live in 2027. The International Monetary Fund (IMF) maintains that crypto presents itself as a major headache for tax authorities globally. In a research paper published last year, it outlined that countries would need to update their tax systems in order to deal with the challenge that crypto presents with the potential for a leakage in tax revenues. In the United States, an Internal Revenue Service (IRS) official stated in December 2023 that the agency has seen an increase in its caseload relative to crypto tax cases.

KuCoin, the Seychelles-based cryptocurrency exchange, has revealed a strategic move in its investment and incubation initiatives through the KuCoin Labs program. In a press release which was published on Tuesday, KuCoin announced its investment in ISSP, a project focused on developing an inscription protocol on the layer one Sui network, renowned for its throughput and scalability.Photo by Towfiqu barbhuiya on UnsplashFirst cross-chain inscription protocolISSP introduces the first cross-chain inscription protocol system, seamlessly integrating an inscription marketplace and inscription swap. The project is in its early stages. Last week ISSP took to social media to announce its inscription-related product launch. It stated:”We are launching the first multi-chain interoperability system for inscription protocols, focused on the BTC ecosystem to enable interoperability between BTC's inscription protocols and other chains.” With the launch, it’s introducing the Sui network’s first inscription protocol under the SUI-20 standard. Leveraging the unique Objects model of the Sui network, ISSP aims to naturally enhance inscription systems. Having already launched the SUI-20 inscription standard protocol on the Sui network, it is utilizing the built-in indexer of the network node to index inscription data. Seamless CEX inscription integrationTo ensure optimal performance and stability of inscription data, ISSP utilizes the indexer integrated into the Sui Chain node. Notably, ISSP facilitates the integration of inscriptions with centralized exchanges (CEX), eliminating the need for additional development to interface with inscription protocols. While the exact financial details of the investment remain undisclosed, ISSP plans to utilize the funds to expand its operations and further its development efforts. ISSP recently achieved a significant milestone by completing its Free Mint process, attracting 13,947 addresses and 2,002,186 transactions (TXs). The surge in user activity led to the Sui Chain's transactions per second (TPS) exceeding 1,000 for the first time. Sui-related investmentsThis marks KuCoin Ventures' continued interest in projects related to the Sui network. Last year, the exchange participated in a funding round for Cetus, a decentralized exchange (DEX) and concentrated liquidity protocol built on the Sui and Aptos blockchains. Alongside KuCoin Ventures, prominent investors such as Comma3 Ventures, AC Capital, Adaverse, Animoca Brands, Coin98 Ventures, IDG Capital, Leland Ventures, NGC Ventures and OKX supported Cetus. In April, the KuCoin crypto exchange actively promoted the SUI token as part of its Spotlight Token Program. The Sui Network seeks to distinguish itself as the first Layer 1 blockchain designed to cater to creators and developers targeting the next billion users in Web3. It provides horizontal scalability for diverse dApp development. Claiming to be a step-function advancement in blockchain technology, Sui prioritizes high throughput, instant settlement speeds, rich on-chain assets and user-friendly Web3 experiences. KuCoin's investment in ISSP underscores its commitment to supporting innovative projects on the Sui network, reinforcing the exchange's role in shaping the future of blockchain development. Similarly, the ISSP's product development demonstrates that following a big year for inscriptions in 2023, further progress is likely to unfold in 2024.

The Enforcement Directorate (ED) — an Indian law enforcement agency — seized 90 crores ($10.5 million) from an online scam app called E-Nuggets with the help of global crypto exchange Binance.  ED is the governmental law enforcement agency responsible for enforcing economic laws and with that, tackling economic crime. According to a report published by Indian English language daily newspaper The Hindu, the online gaming app E-Nugget had cryptocurrencies worth $10 million stored in 70 different crypto wallet accounts spread across the three crypto exchanges.  Local Indian exchanges ZebPay and WazirX also aided the ED in its investigations and subsequent actions. The ED contacted these exchanges to block the wallet addresses and transfer the crypto assets to the agency’s wallet. Photo by Naveed Ahmed on UnsplashCrypto assets seizedThe ED, tasked with upholding such financial crimes, spearheaded the operation against E-Nuggets, an online gaming platform masquerading as a legitimate investment opportunity. Taking to the X social media platform on April 30, the Indian law enforcement agency stated: “ED, Kolkata led a successful operation against a major “online gaming app scam” known as “E-Nugget”. The E-Nugget app, masqueraded as a gaming platform, promised users high returns on their investments. Crypto assets which were taken into possession of ED are transferred into Crypto Wallet of ED.” 70 wallets implicatedWith cryptocurrencies valued at $10 million spread across 70 different wallet accounts on three crypto exchanges, the agency swiftly took action. E-Nuggets enticed unsuspecting investors with promises of substantial returns through its purported gaming interface. However, once investments were made, the platform vanished into thin air, leaving users unable to recoup their funds. The ED's investigation revealed a complex web of deceit, with the agency seizing properties totaling over 163 crores ($19.5 million), comprising cash, cryptocurrency holdings, account balances and office spaces. The scam involved the funneling of funds into digital assets through 2,500 dummy bank accounts, resulting in the discovery of 19 crores ($2.2 million) in cash. A first information report (FIR) filed at the Park Street Police Station in Kolkata, became the catalyst that triggered the ED case that was subsequently registered under the provisions of India’s Prevention of Money Laundering Act (PMLA). Masterminded by Aamir Khan, who was apprehended alongside accomplice Romen Agarwal, the scheme operated under the guise of digital transactions, which, ironically, facilitated its unraveling. Law enforcement agencies adeptly traced, froze and seized the illicit funds as they moved through the digital realm. Public ledger upends scammersCritics often point to the potential for cryptocurrency to facilitate money laundering. However, the inherent transparency of blockchain technology presents significant obstacles to such illicit activities. Notably, in the infamous 2016 Bitfinex hack, where hackers absconded with 119,756 Bitcoin, the culprits were eventually apprehended in 2022 while attempting to launder the stolen funds. The collaborative efforts between Binance, the ED, and local exchanges points to a developing commitment towards combating financial fraud within the cryptocurrency space. This wasn’t the first occasion in which Binance had cooperated with law enforcement on such matters. In October of last year, the company got with the Thai authorities to assist them in crushing a crypto-related scam. By leveraging blockchain's transparency and international cooperation, authorities can effectively dismantle illicit schemes, safeguarding investors and upholding the integrity of the digital asset ecosystem.