Profitability eludes Canaan despite further growth

Chinese Prosecutors Issue Warning on NFTsIn recent days, China’s top procuratorial agency, the Supreme People’s Procuratorate of China, issued a warning alongside some guidelines on non-fungible tokens (NFTs).The Supreme People’s Procuratorate is the highest office in China charged with the mandate of upholding legal integrity, safeguarding citizens’ rights, and where necessary, conducting criminal investigations. In a statement published on Monday, the agency set out an advisory, together with additional recommendations, pertaining to NFTs.Photo by Markus Winkler on PexelsNFT status in ChinaWhile all and sundry are aware of a multi-year crack-down by the Chinese authorities on crypto in recent times, exemplified by a ban on crypto trading and the operation of crypto mining facilities within the country’s borders, the status of NFTs has been discussed to a much lesser degree.NFTs remain legal within the country. When the crypto trading ban came into play in 2021, much of the local industry connected with that trading activity disappeared. However, in its place, a newly emergent trend came to the fore in the form of NFTs. With cryptocurrencies perceived as being high risk and sanctioned by the authorities, attention turned to NFTs and there has been a surge of adoption of the digital collectibles within China as a consequence.NFT risksThe procuratorial agency highlighted a number of attributes as well as risks in relation to NFTs in the report that it published. The agency finds the issue of ownership of NFTs as a troublesome one. It cites the fact that NFTs can be replicated and distributed at will on this basis as being particularly problematic. The legitimacy of the right source of the work itself is the decisive factor for the healthy and orderly development of digital works NFT transactions,” it states.It appears that the agency, like many in traditional professional circles before them, have a difficulty recognizing the model of asset ownership that NFTs incorporate. That ownership is not defined by civil law or in accordance with centralized systems but by simply the possession of the requisite private key pertaining to a given NFT within a decentralized system.Blockchain, not cryptoThe agency acknowledged that NFTs do present a novel application of blockchain technology. This is not surprising as while there might be an ongoing clampdown on decentralized cryptocurrencies in China, officials at a national level and in numerous instances within regional administrations, are demonstrating a strategy of leveraging blockchain technology for the betterment of the Chinese economy in the future.Public prosecutor Wang Xia-fen, one of the authors of the report, stated: “It’s widely recognized that digital collectibles have the potential to protect intellectual property rights, boost content creation and enrich the digital economy.” Wang encouraged public prosecutors to “find the distinction between real innovation and criminal activities” where NFTs are concerned.The upshot of its report though, is that the procuratorial agency is uncomfortable with the similarity of many of the attributes of NFTs when compared with decentralized cryptocurrencies. It issued a warning on that basis, emphasizing a need for risk assessment to be carried out and further consideration of the legal risks that are implicated.

Dunamu Loses Lawsuit Seeking $19M in Corporate Tax Refunds After Venture Status RemovalDunamu, the operator of South Korea’s largest cryptocurrency exchange Upbit, lost a 24.8-billion-won (approximately $18.7 million) corporate tax lawsuit, according to local news outlet The Korea Economic Daily. This legal action emerged after Dunamu was removed from the list of registered venture firms in December 2018. The Seoul Administrative Court ruled that since Dunamu was no longer a venture, it was not eligible for the associated tax benefits.Photo by Tingey Injury Law Firm on UnsplashLosing venture statusIn September 2017, Dunamu obtained certification as a venture company from the Ministry of SMEs and Startups. However, this certification was revoked in December of the following year. This revocation was due to an amendment to the Enforcement Decree of the Venture Businesses Act in October 2018, which resulted in the exclusion of “blockchain-based crypto asset trading and brokerage” from the venture business classification. Consequently, the withdrawal of this certification rendered the company ineligible for government tax incentives.Tax refund request deniedIn August 2020, Dunamu took action by formally requesting a refund of KRW 24.8 billion in taxes previously paid to the tax office. The foundation of its claim rested on its entitlement to venture company tax benefits up until the corporate tax period of 2018. However, its request was turned down, leading Dunamu to escalate the matter by initiating an administrative case against the tax authorities, following an unfavorable decision by the Korean Tax Tribunal.Meanwhile, an amended version of the Act on Special Cases Concerning Taxation Restrictions, which excluded cryptocurrency-related industries from benefiting from tax reductions, went into effect in January 2019. Pointing to the effective date of this act, Dunamu argued that the company should be entitled to benefits applicable up until the corporate tax cycle of 2018. Furthermore, Dunamu highlighted its legal action, which had led the administrative court to suspend the effects of the venture company certification revocation from December 31, 2018, to January 18, 2019.Court’s stanceDespite these arguments, the court rejected Dunamu’s argument and upheld that tax relief could not be granted for the tax year encompassing the date of the removal of its venture status. Additionally, the court affirmed that the tax authorities’ decision was valid since the venture status had been revoked in 2018, regardless of the amended Taxation Act’s implementation.In disagreement with the court’s ruling, Dunamu has filed an appeal against the decision.

KISA and Ministry of Science and ICT Launch Blockchain Program for InnovationThe Korea Internet and Security Agency (KISA) and the Ministry of Science and ICT announced on Thursday that it held an initiation ceremony for the 2023 Blockchain Nuridan — an annual program aimed at recruiting beta testers for blockchain services to foster an ecosystem for blockchain innovation.Photo by Shubham Dhage on UnsplashPublic participation in advancing blockchain in KoreaNow in its fifth year, Blockchain Nuridan offers hands-on experience in blockchain services in order to raise public awareness of blockchain technology and businesses and gather feedback on how to improve these services.This year, 150 citizens who have a high level of understanding of the industry, such as blockchain professionals, university students majoring in blockchain, and more, have been selected to test and experience various services from twelve different blockchain projects, then provide comments and feedback for improvement. They will also be responsible for choosing services to be beta tested next year as well as sharing their reviews of the services on their social media accounts.Fostering collaboration and engagement“Together with the Blockchain Nuridan, KISA will do our best to enhance the competitiveness of companies participating in blockchain projects and provide services that will bring convenience to people’s lives,” said Kwon Hyun-oh, Head of the Digital Industry Division at KISA.At the latest initiation ceremony, the citizens received certificates for their participation and were issued non-fungible token (NFT) badges. There was also an information session outlining the details and role of the program.