Taiwan proposes criminalization of crypto firms violating AML rules

Binance’s Entry Followed by Increased Scrutiny on Foreign Executives in Korean Crypto FirmsSince Binance’s acquisition of South Korean crypto exchange GOPAX earlier this year, it appears that South Korean financial authorities have tightened their oversight of virtual asset service providers (VASPs), according to an article by local news outlet News1.Photo by Vadim Artyukhin on UnsplashAuthorities had previously instructed existing VASPs to report any changes in their location or registered executives. However, according to industry sources on Monday, authorities recently issued a notice to VASPs, emphasizing the importance of reporting the appointment of foreign executives as well. This change in authorities’ approach is not unrelated to the recent incidents involving Binance and GOPAX, which have caused ripples in the Korean market.Ongoing leadership changesBinance acquired a majority stake in Streami, the operator of GOPAX, back in February after GOPAX struggled to make principal and interest payments on its own decentralized finance (DeFi) service, GOFi, in the wake of the FTX collapse that happened in November 2022. In doing so, Binance injected capital into GOPAX in order to provide a solution for the issue.This marked Binance’s entry into the Korean market, with the number of monthly active users in the country soaring since then. A survey conducted in June by blockchain-based polling app Cratos also revealed that the Korean public had an overall favorable opinion towards the acquisition.Following the acquisition, Streami underwent multiple leadership transitions with Lee Jun-haeng resigning and Binance’s Asia Pacific Head, Leon Sing Foong, taking over. Shortly after, Foong also stepped down, and the baton was passed to Lee Joong-hoon, GOPAX’s former Vice President. It is also notable that Foong recently left Binance altogether amid regulatory scrutiny.Streami subsequently submitted reports to the Financial Intelligence Unit (FIU) under the Financial Services Commission in line with requirements to inform the regulatory body about these changes. However, the FIU has not yet granted its approval, likely due to the legal challenges Binance is currently facing in multiple jurisdictions worldwide.In a seeming effort to address this regulatory roadblock, Streami has recently decided to delegate yet another CEO whose identity has not yet been disclosed. This marks the third leadership shift in just half a year.On the other hand, crypto trading platform Crypto.com also acquired the exchange OKBIT last year. However, its process of entering the Korean market was quite different from that of Binance, as the platform received proper approval for changes in executive positions, such as the appointment of Rafael de Marco e Melo as Chief Financial Officer.Mounting roadblocksIt appears that authorities have now decided to form a more robust oversight system, including monitoring changes in foreign executive appointments at VASPs. However, some argue that such regulatory changes could be perceived as a hindrance for global exchanges looking to enter Korea’s lucrative crypto market where there is a high level of investor sentiment from up to seven million individual investors.To operate as a virtual asset business in the country, businesses must obtain preliminary certification for an Information Security Management System (ISMS) and register as a VASP. Obtaining ISMS certification is a time-consuming process, prompting overseas VASPs to enter the Korean market by acquiring businesses that have already received certification in Korea.However, if the entry barriers to Korea increase as authorities start to scrutinize changes in foreign executive positions, global VASPs may reconsider entering the market.

Singapore Judge Says Crypto Not MoneyIn recent years, legal processes in various jurisdictions worldwide have seen judges comment on whether cryptocurrency is actually money. The latest such determination has been made by Justice Vinodh Coomaraswamy who outlined in a Singapore court that while being a component of financial transactions, cryptocurrencies are not money.The consideration emerged in a recent court hearing at Singapore’s High Court in a case involving the Algorand Foundation and failed Singapore-based hedge fund, Three Arrows Capital (3AC). Justice Coomaraswamy’s comments arose due to a discussion in the midst of the court proceedings involving the Judge and counsel representing the Algorand Foundation.©Pexels/EKATERINA BOLOVTSOVASeashells as moneyIn setting out his rationale for the need for 3AC to be wound up, Daniel Chan, a lawyer for the WongPartnership law firm that was representing the Algorand Foundation in the proceedings, told the judge that despite foreign currencies not being recognized as legal tender in Singapore, or used broadly as a medium of exchange within the city state, those foreign currencies are recognized by Singapore law as money. Using that analogy Chan suggested that by implication, the same scenario should be considered where cryptocurrencies are concerned.The judge provided a counterpoint: “What if you had a [community] in the world that used seashells as its internal medium of exchange? Would the Singapore courts have to recognize that as money.” Chan claimed that the judge had used an extreme example although Coomaraswamy remained steadfast in his view, pointing out that seashells had indeed been used as a form of money in the distant past.Coomaraswamy proceeded to dismiss the Algorand Foundation’s winding up application. He acknowledged that the Foundation did have standing in bringing the application. However, as he determined that cryptocurrency couldn’t be classed as money, on that basis he dismissed the application. In conveying his decision, he stated: “The word indebtedness, in my view, must require a debt which is in fiat currency. Determining whether or not a particular intangible, such as cryptocurrency, is money would require a detailed examination of evidence which is not appropriate in the context of insolvency.”Legal tenderThus far, bitcoin has been recognized as legal tender in two countries — El Salvador and the Central African Republic. In 2020, a French court referred to the leading cryptocurrency as money, agreeing that Bitcoin loans can be recognized as customer loans in the same way as loans denominated in fiat currencies. Earlier that year, an Australian court recognized bitcoin as a legally legitimate form of investment. In the United States, a Federal court recognized bitcoin as “money” or “funds” in a prosecution taken against Silk Road website operator Ross Ulbricht.There have been many similar instances in courts globally where judges have had to grapple with the consideration of whether bitcoin and crypto more generally can be regarded as money. Similar to the difficulty authorities are having in regulating cryptocurrency, it’s an issue that in most cases lacks complete clarity and in which we can expect further discussions on, similar to this most recent consideration in the Singaporean high court.

Recent reports from local media outlets indicate that Indonesian authorities have conducted raids on crypto mining sites, accusing them of illicitly siphoning electricity from the utility poles of the state-owned electricity company. The government’s intervention comes as part of a broader effort to address energy theft and regulate the cryptocurrency mining industry in the country.Photo by Fré Sonneveld on UnsplashTen mining sites raidedOfficials from the state-owned electricity company PLN highlighted the importance of coordinated efforts in exposing the unauthorized mining operations that were tapping into the national grid without approval. According to the reports, the ten illegal bitcoin mining sites which were raided incurred a financial loss of approximately 1.4 billion Indonesian rupees, equivalent to $100,000 for the state. The impact of energy theft extended beyond financial concerns, raising environmental and community-related concerns. Local students, alarmed by the potential consequences, urged PLN and regional police to investigate the mining operations. Subsequent action revealed that the theft was indeed taking place, prompting PLN officers from the Bukit Barisan Customer Service Implementation Unit (UP3) to conduct a raid. However, the officers faced threats and resistance, leading to a close coordination between PLN and the North Sumatra Regional Police. The raid uncovered a total of 1,300 bitcoin mining machines engaged in illegal operations, with each machine consuming a substantial 1,800 watts of electricity. Inspector General Agung Effendi, the North Sumatra Police Chief, disclosed that the illicit activities had been ongoing for an estimated six months, resulting in the arrest of 26 individuals across the ten locations.PLN reassured stakeholders of continued collaboration with the police to prevent further electricity theft and safeguard the national grid from such unauthorized activities. Worldwide concernThe incident in Indonesia reflects a global concern over the energy consumption of cryptocurrency mining operations generally, but also with regard to illegal activity. In recent years, the environmental impact of these operations has become a focal point in public policy debates, with climate activists emphasizing the harm caused. Government officials, on the other hand, express concerns about the potential disruption to the total distribution network if not properly regulated. In September, neighboring Malaysia identified illegal crypto mining activities in the state of Sarawak as the reason for recurrent power disruption. Meanwhile, in Singapore in August, authorities uncovered a crypto mining scam that cheated investors out of $1.3 million dollars. Indonesia joins other countries that have conducted raids on crypto mining operations accused of running large-scale, unregistered facilities. Malaysia has witnessed multiple arrests related to digital asset mines, while in Venezuela, authorities seized bitcoin machines and weapons from a recaptured prison controlled by a criminal gang. Legitimate mining potentialNotably, this marks the first such incident in Indonesia, and energy theft charges in the country are punishable by up to five years in prison or 200% of the stolen energy’s value. Despite these problems, Indonesia also understands the opportunity that exists where legal bitcoin mining is carried out. In May, Ridwan Kamil, Governor of the province of West Java, participated in a fireside chat titled “The Indonesia Bitcoin Mining Campaign.” During that event, Governor Kamil recognized the potential that bitcoin mining offers Indonesia. He stated: “[Indonesia has] the second most geothermal potential in the world — more than 800 rivers with hydropower. As bitcoin allows the transformation of energy into money, bitcoin could be transformative for Indonesia.” The global trend of addressing energy consumption in crypto mining is evident in Kazakhstan, where regulators seek to limit miners’ access to the national grid unless they operate solar-powered mines. Indonesia, with its pro-crypto population, is also moving towards increased regulation, mandating all crypto exchanges to register with the Commodity Futures Exchange (CFX) to continue operations beyond August 2024.