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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.

Japan’s Cryptoasset Group Proposes Self-Regulatory Reforms for IEO SystemThe Japan Cryptoasset Business Association (JCBA) has revealed a preliminary draft advocating for reforms in self-regulation to bolster the soundness of the initial exchange offering (IEO) system. This draft has been submitted to the Japan Virtual and Crypto Assets Exchange Association (JVCEA).IEOs serve as a mechanism enabling various enterprises to accrue funds and broaden their user base by orchestrating token sales on cryptocurrency exchanges for Web3 projects. This fundraising method holds the potential to enhance trust as crypto exchanges, supervised by the Japanese Financial Services Agency, undertake evaluations of project feasibility and maintain ongoing oversight.Photo by Takashi Miyazaki on UnsplashPositive regulatory developmentsThe ameliorating regulatory landscape is also a positive development, highlighted by this year’s tax law amendment, which grants exemptions to enterprises’ self-issued tokens from year-end corporate taxation. In Japan, four IEOs have been conducted so far, with the inaugural IEO amassing over 900 million yen (approximately $6 million). The cumulative amount from the four IEOs has surpassed 4.4 billion yen. However, given that the IEO is a relatively nascent fundraising method, improvements in token price stability and operational modalities are required to ensure that businesses and users can engage with it confidently.Enhanced user protectionAgainst this backdrop, JCBA, an organization comprised of various enterprises involving virtual assets and Web3, has been discussing the direction of the IEO system from a corporate viewpoint since May of this year. Establishing price stabilization measures and selling restrictions within the Japanese IEO system will contribute to user protection by allowing investors to manage their assets under domestic regulations. JCBA stated that users will find domestic exchanges more secure in comparison to foreign ones.As this proposal represents an initial draft, deliberated and formulated only within the JCBA, the group intends to consult and assess the feasibility of the self-regulatory rules with each pertinent organization as necessary.Four key pointsThe document submitted by JCBA to JVCEA presented four key points concerning the IEO. Pertaining to pricing, it suggested the diversification of calculation methods customized to each project and the specification of price-related disclaimers. On liquidity, it posited that liquidity objectives should be established at the time of listing, and an environment conducive to securing liquidity should be developed. JCBA also pointed out the necessity of establishing rules for price stabilization measures at the time of listing. Finally, regarding selling restrictions, it was noted that both token issuers and exchanges should adhere to a minimum three-month lock-up period for tokens.

Korea’s Internet Agency Encourages More Blockchain Tech Adoption to Overcome Crypto WinterVirtual asset and blockchain technology needs to be more broadly adopted to overcome crypto winter, an official from the Korea Internet and Security Agency (KISA) said at the 2023 Blockchain Meetup Conference on Wednesday.©Pexels/Helena LopesUser-friendly apps and regulatory supportPark Sang-hwan, the leader of the blockchain technology promotion group at KISA, encouraged the blockchain industry to develop user-friendly applications to give positive impressions, adding that blockchain-based apps should be faster and efficient to meet users’ expectations.He also said the blockchain industry needs regulatory support, explaining that regulatory issues can hinder the growth of the industry’s growth.KISA’s support for blockchain industryAccording to Park, the quasi-government internet agency introduced a business quality control system to offer advice on legal, technological, and business issues to companies, as well as to provide them with business problem-solving support. KISA will continue driving the development of key blockchain technologies, create new business plans for Web 3.0, and devise a mid- to long-term roadmap for research and development, he said.Blockchain projects in KoreaDuring his speech at the conference, Park presented several KISA-led public sector projects that will unfold this year, as reported by the Korean economics newspaper Hankyung. They include blockchain-based online voting systems, the establishment of digitally formed national licenses, and the verification of personal identification.Endeavors in the private sector were also revealed, including NFT-based concert tickets, oil waste disposal systems, and identification using soulbound tokens.