Binance to Incubate Startups, Provide Blockchain Education in Incheon City

As the Virtual Asset User Protection Act is set to take effect in July, South Korean virtual asset services providers (VASPs) are preparing themselves for new crypto accounting standards. This development is pushing crypto businesses to take consultation services from accounting firms, local media outlet Yonhap Infomax today reported.  Pronounced last year, the new crypto accounting guideline is scheduled to be applied to VASPs starting this July. Rather than providing clear and explicit standards, the guideline requires crypto businesses to interpret it on their own based on “reasonable grounds.” One accountant in the crypto industry said that individual crypto exchanges are wrapping their heads around the new crypto accounting standards, pondering over numerous issues such as whether to manage customer assets in a single record-keeping system. Photo by Volkan Olmez on UnsplashThe most significant concern among VASPs is that the new standard will highly likely recognize crypto assets entrusted by customers as either assets or liabilities. So far, local crypto exchanges haven’t recognized custodial tokens as assets; instead, they have been including these tokens in the footnotes. Only the money users deposited in Korean won has been acknowledged as “customer deposit liabilities.” Dunamu, the operator of crypto exchange Upbit, stated in the footnotes of its previous quarterly report that virtual assets entrusted by customers do not meet the accounting definition of an asset, leading the exchange to exclude its users’ custodial tokens from the asset category.  Varying interpretation of ‘control over custodial assets’ A lot is at stake depending on how individual crypto exchanges interpret the new guideline. If crypto exchanges are deemed to have control over custodial assets, they must meticulously document the details of the assets in custody on their financial statements, including the total amount of custodial assets and how they are managed under what policies.  These details would serve as decisive factors in determining who bears the liabilities in the event of future incidents.  Crypto businesses’ accounting dilemmaThe Korean financial regulators have explained that the new guideline is not the ultimate golden rule, implying that there could be a leeway for crypto businesses if they have reasonable grounds for not following the new accounting standard. However, regulators said they will conduct thorough examinations on the financial statements following their publishment, to ensure that custodial assets are not left out in the documents. This is where VASPs face a difficult choice between two different options; they can either classify custodial tokens as something other than an asset and undergo thorough examinations, or they can recognize them as an asset and risk being included in the “mutual investment-restricted group.” This is a group consisting of large local firms with over nearly KRW 10 trillion ($7.5 billion) in total assets. The companies listed in the group are subject to strict government regulations.  Previous recognition of Dunamu as ‘big firm’ raises concerns among VASPsThe local regulatory authority previously classified Dunamu as part of the mutual investment-restricted group in 2022.  At the time, Korean won deposits made by Upbit users, categorized under the customer deposit liabilities, were recognized as part of its assets by the Korea Fair Trade Commission (KFTC). The KFTC determined that Dunamu had controlling power over the customers’ deposits. This judgment by the KFTC led the company to fall under the mutual investment-restricted group. Once the new accounting standard takes effect in July, the likelihood is that the exchange’s custodial tokens, currently valued at KRW 20.2 trillion, will also be recognized as assets. Meanwhile, another prominent crypto exchange Bithumb is reported to have KRW 4.5 trillion in total assets.   Another accountant in the crypto industry expressed concerns, saying that VASPs will have to deal with more regulations if incorporated into the mutual investment-restricted group. The person added that recognizing custodial tokens as assets could further heighten the management risks for crypto businesses. 

Hong Kong Exchanges and Clearing Limited (HKEX), the operator of the Hong Kong stock exchange, has announced plans to launch a digital asset price index. The index which the company is marketing as the HKEX Virtual Asset Index Series, will aim to provide for the developing asset class, while complimenting Hong Kong’s overarching efforts to transform itself into a regional digital assets hub. The company announced details of the new product offering in a press release published to its website on Oct. 28. HKEX indicated that the product will go live on Nov. 15, outlining that the product “provides investors with transparent and reliable benchmarks for Bitcoin and Ether pricing in the Asian time zone.”Photo by Kanchanara on UnsplashReference index for Bitcoin (BTC) and Ether (ETH)The firm claims that the Index Series will include a Reference Index for Bitcoin (BTC) and Ether (ETH) while providing a Reference Rate for the two leading digital assets. The Reference Index will be formulated using a 24-hour volume-weighted reference spot price, with that pricing coming from leading virtual asset exchanges. The Reference Rate has been devised with the settlement of financial products in mind. As a result, it will be calculated on a daily basis at 16:00 Hong Kong time. From a compliance perspective, the product complies with the European Union’s (EU) Benchmark Regulation (BMR), being the first such product to be developed in Hong Kong. Additionally, the Index Series will be administered by CCData, a UK-headquartered data and index solutions firm formerly known as CryptoCompare.  Taking to the X social media platform, CCData outlined that the product is underpinned by its data selection process, leveraging its “Exchange Benchmark methodology to provide highly robust real-time and EOD  [end-of-day] reference rates.” The firm added that the offering will introduce “essential benchmarks for the Asian market,” while enhancing transparency and reliability within the digital assets sector, broadening opportunities for market participants across the region. Enabling informed investment decisionsHKEX CEO Bonnie Chan said that the company was pleased to introduce the HKEX Virtual Asset Index Series to meet the region's growing demand for this fast-emerging asset class. “By offering transparent and reliable real-time benchmarks, we seek to enable investors to make informed investment decisions,” she added.Like many other financial services firms in TradFi, HKEX has been getting itself acquainted with the blockchain and digital assets sector. In October of last year, the firm launched a blockchain-based settlement platform called Synapse. The platform relies upon DAML-based smart contracts. Earlier this year, a number of asset management firms launched spot Bitcoin and Ethereum exchange-traded funds (ETFs) on the exchange. In April, a report published by HKEX suggested that the true potential of crypto ETFs had yet to be fully realized, pointing out that a number of regulatory tweaks would be necessary to better support digital asset-based products. HKEX itself could have a greater role to play in the expansion of the digital assets sector in Hong Kong. Last month Hong Kong Legislative Council member Lee Wai-hung called on the platform to expand its range of derivatives, including crypto derivatives.

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.