Korea considers legal recognition of virtual assets as trust assets for investor protection

The Need for Crypto Regulation Improvements in South KoreaAlthough the cryptocurrency market entered a bearish phase last year, there are prospects for growth as regulatory inclusion and market transparency begin to improve. However, the domestic market is currently hindered by deepening monopolies and inadequate support policies, limiting the development of the industry, said Kim Jin-won, Executive Director of Korean crypto exchange COREDAX, during a conference last Friday in Seoul.The conference, hosted by the Federation of Korean Industries, invited experts to discuss the oncoming era of convergence and the current status and challenges of virtual asset legislation in South Korea, as well as the necessary steps for improving regulations on virtual assets.Photo by Kanchanara on UnsplashGlobal decentralization trendsOverseas, various decentralized projects, such as the integration of blockchain technology into traditional financial markets, have led to the growth of related markets such as Bitcoin futures, decentralized finance (DeFi), over-the-counter (OTC) trading, custodial services, the metaverse, and Web3. However, in Korea, the lack of clear guidance or policy management for crypto businesses and services prevents the market from thriving.Countries like the US and Japan as well as the European Union (EU) are overhauling regulations in order to dominate the global industry and market through blockchain technology and virtual assets. Kim emphasized that Korea also needs to incorporate such flexible regulatory improvements considering the likely possibility that various industries are going to thrive on crypto-related businesses.Challenging existing regulations and calls for clarityHe started off by stating that the implicit regulation known as the “One Exchange, One Bank” principle was created for administrative convenience and is acting as a barrier to entry into the crypto industry. He argued that it is a discriminatory regulation, especially considering the fact that securities firms choose to operate stock trading accounts through multiple banks.Regarding the standards for issuing bank accounts under real names, which will be determined by the Financial Intelligence Unit (FIU), he argued that they are difficult to comply with, even for banks that already have contracts with crypto exchanges. He called for the FIU to express a clear stance on the retroactive application of these standards to avoid potential consequences such as barriers to market entry for late-movers.“The crypto market — including DeFi, non-fungible tokens (NFTs), artificial intelligence (AI), the metaverse, and Web3 — is growing at an annual average rate of 12.8%, and is expected to reach a scale of $4.9 billion by 2030,” he said. “When combined with Web3 innovation, the metaverse will evolve into a 3D platform business that incorporates the use of payment methods, NFTs, and virtual assets.”Promoting innovation in the crypto industryTo foster such industry growth, it is necessary to actively explore new types of services as well as potential challenges. Innovative financial services should also be designated or promoted through regulatory sandboxes. The regulatory sandbox is a system run by the Korean government that exempts or suspends existing regulations for a designated amount of time for companies releasing new products and services and regulates them post-mortem if there is a problem.Kim went on to propose specific measures such as negative regulations — regulations that outline what is prohibited by law while allowing everything else — to promote new industries. He also suggested that banks should be allowed to engage in custodial services for virtual assets.Furthermore, he highlighted the need for cooperation between payment companies and crypto firms. “Payment service providers like Visa and Mastercard are already collaborating with global crypto exchanges to incorporate virtual assets into their businesses,” he said. “With companies like Tesla, eBay, and more adopting or considering adopting cryptocurrency as a payment method, we must consider allowing collaborations between domestic credit card companies, payment gateway companies, and crypto firms.”He also urged for the early approval of initial exchange offerings (IEOs) to stimulate the crypto market and advocated for support policies for virtual asset service providers (VASPs). He cited examples such as brokering transactions for security tokens, allowing OTC trading, requesting security token issuance assessments through system integration with account management agencies, and permitting outsourcing for issuance operations.

Coincheck, a subsidiary of Monex Group, a Tokyo-based global financial services firm, has gained U.S. Securities and Exchange Commission (SEC) approval to become the first Japanese crypto exchange to list on the Nasdaq, an American stock exchange.Photo by Denys Nevozhai on UnsplashSPAC mergerThe approval by the U.S. regulator was filed on Nov. 13. The listing has been enabled due to the company’s decision to enter into a merger with a special purpose acquisition company (SPAC), namely Thunder Bridge Capital Partners (TBCP).  A SPAC raises money through an initial public offering (IPO) to either acquire or merge with an existing company. Opting for a SPAC means that Coincheck can forego a lot of the time and expense that would be necessary if it attempted to effect an IPO on its own. Parent company Monex Group published a statement outlining that Coincheck CEO Yuko Seimei had “been diligently preparing for listing its common stock on the Nasdaq Global Market (“Nasdaq”) through a previously announced business combination with Thunder Bridge Capital Partners.” Possible Nasdaq listing on Dec. 10 In a press release issued by TBCP, the company claimed that the proposed merger is anticipated to close on or about Dec. 10, 2024. That eventuality is subject to stockholder approval, Nasdaq approval and specific closing conditions. Consequently, Coincheck’s Nasdaq listing could potentially happen as early as Dec. 10. TBCP is holding a shareholder vote on the merger on Dec. 5. If all conditions are satisfied to pave the way for listing, the company’s stock will be listed using CNCK as the Nasdaq stock ticker. Once the merger and Nasdaq listing have been accomplished, Coincheck will still remain a subsidiary of Monex Group. The merged business will gain access to $237 million, held in trust by TBCP, with Monex retaining an 82% stake in the company. Furthermore, Thunder Bridge CEO Gary Simanson will lead the new company. The $1.25 billion merger had been in the works since 2022, having faced multiple delays on the path towards merger completion and Nasdaq listing. Coincheck finally filed with the SEC to merge back in May. Parent company Monex has other interests in the digital asset sector beyond its involvement with Coincheck. Last December the company acquired a majority stake in 3iQ Digital Holdings, a Canadian crypto asset management company.Monex has just launched a new brand, Monex Web3, comprising of Monex’s Web3 business portfolio. It also offers a Web3 consulting business, using its local know-how to guide Web3 startups in entering the Japanese market. Coincheck has also engaged in partnerships to assist other firms in gaining access to the Japanese market. Earlier this year the leading Japanese crypto exchange partnered with USD Coin (USDC) stablecoin issuer Circle, in an effort to expand USDC access within the local market. In January 2018 the exchange suffered what was at the time the world’s largest ever digital asset theft, losing $534 million in virtual assets in a hack of the platform.

Zodia Custody to Commence Yield Offering on StablecoinsIn a play that’s designed to entice institutional investors, Zodia Custody, a portfolio company of Japanese financial services conglomerate SBI, is gearing up to offer a yield on digital assets.Photo by CoinWire Japan on UnsplashIntroducing “Zodia Custody Yield”The crypto startup has introduced “Zodia Custody Yield,” a crypto staking option designed to reward holders of crypto assets stored within its platform. The initiative has been launched in partnership with Singapore-based DeFi platform OpenEden. It promises returns on stablecoins although full details on the offering remain undisclosed.Jeremy Ng, Co-Founder of OpenEden, expressed his belief in the potential of cryptocurrencies to generate substantial passive income for their holders. Ng stated:“There are billions of dollars worth of stablecoins sitting on the sidelines when they could easily be generating yields for investors.”TradFi embracing digital assetsZodia’s move aligns with a growing trend in the financial industry. Yesterday, a leading US bank, Citi, disclosed its collaboration with Maersk to facilitate services that convert funds into digital assets. The primary goal is to enable the bank’s customers to execute nearly instantaneous payments, unrestricted by traditional business hours.Simultaneously, several prominent asset management firms are awaiting a pivotal decision from the Securities and Exchange Commission (SEC) regarding their applications to launch a spot Bitcoin exchange-traded fund (ETF). This list includes major players such as BlackRock, Invesco, WisdomTree, ARK Invest, Valkyrie, and Franklin Templeton. BlackRock, the frontrunner in the efforts being expended towards ETF approval, submitted its application for a spot Bitcoin ETF on June 16.In a recent interview, Bloomberg analyst Eric Balchunas said that he expects $150 billion in capital to flow into the Bitcoin market within two years of a spot Bitcoin ETF approval in the US.The financial strategies of these entities now prominently feature blockchain and crypto-based products, once considered niche but now integral to their operations. Nonetheless, even with widespread anticipation of the approval of BlackRock’s ETF, the firm faces substantial obstacles. US regulators have subjected BlackRock to intense scrutiny due to concerns regarding its ties to China. Additionally, political figures have criticized the asset manager for prioritizing environmental, social, and governance (ESG) criteria over investor returns.Zodia was spun out of British multinational banking firm Standard Chartered. The bank has a positive outlook relative to crypto. In a bold prediction made in June, the UK-based bank forecasted that the value of Bitcoin could potentially surge to $50,000 by the end of the year, with an even more optimistic projection of $120,000 for 2024.In 2021 Standard Chartered, in collaboration with Northern Trust, a leading asset servicing firm, founded Zodia Custody. Since its inception, the venture has garnered a respectable level of success. It successfully secured $36 million in investments and solidified a partnership with SBI Digital Asset Holdings, enabling its expansion into the Japanese market.In May, the firm launched its crypto custodian service in Dubai, having signed a memorandum of understanding (MOU) with the Dubai International Financial Center (DIFC). In June, Zodia partnered with blockchain infrastructure provider Blockdaemon, in an effort to further its crypto staking offering. Earlier this month, the company announced its arrival in Singapore, with a view towards expanding its digital asset custody service there.