Falcon Labs fined in settlement with CFTC

Ethereum Co-Founder Highlights User-Friendly Crypto Wallets at Ethcon Korea 2023Ethereum co-founder Vitalik Buterin delivered a keynote speech last Friday at Ethcon Korea 2023 — a hackathon and conference sponsored by Ethereum for the Korean Ethereum community in Seongsu-dong, Seoul — where he emphasized the importance of making crypto wallets user-friendly by striking a balance between user familiarity and decentralization.Photo by Nenad Novaković on UnsplashEnhancing security and convenienceParticipating in the event via video call, Buterin explained Ethereum’s ERC-4337 account abstraction upgrade during his speech, which was livestreamed on the Ethcon Korea YouTube channel. “The goal of account abstraction — a field that many wallets are currently working on developing — can be broadly categorized into two areas: security and convenience,” he said.Deployed on the Ethereum mainnet in March, the ERC-4337 is a standard that makes it possible to transact and create contracts in a single contract account, paving the way for more user-friendly crypto wallet designs. At its core are features such as easy account recovery, improved security, and customized services like auto-pay and bundled transactions. This provides a more convenient alternative to other crypto wallets, which mostly rely on private keys for account access, complicating setup and recovery procedures especially if a user loses their seed phrase.“Wallets must fundamentally be secure in a decentralized way, but there should also be ways to recover passwords as hardware wallets do,” Buterin stated. “However, many projects still rely on methods such as account recovery via email.”Simplifying transactionsAnother change introduced through the update is gas flexibility. Gas is a fundamental fee that users must pay to conduct transactions or execute a contract on Ethereum. Wallets backed by ERC-4337 can pay gas fees with any Ethereum utility tokens and more, including USD coins (USDC).From a convenience standpoint, Vitalik argued, it is very useful for first-time Ethereum users to be able to pay for gas with the USDC they already have. Sponsored transactions, where applications pay for fees, will be a great way to attract new users, especially for non-financial applications.He further elaborated that in order to transition from being user-friendly but centralized to more decentralized, a combination of a faster but precarious centralized approach with a slower but safer decentralized approach is required.He also stressed the importance of utilizing the various options available in modern technology concerning convenience, security, and decentralization, saying that it is essential to utilize these options effectively, continuously improve them, and take advantage of the benefits.Since 2019, Buterin has used Ethcon as a platform to announce Ethereum’s development roadmap and major technical updates.

Japan Set to Tighten Crypto AML RulesJapan is working on tightening anti-money laundering (AML) rules relative to digital assets shortly. That’s according to a report by local media outlet Kyodo News.The stricter enforcement measures will take effect from June 1. The objective is to include the tracing of cryptocurrency asset transactions into the legal framework relative to AML, and in that way, bringing the application of AML in Japan into line with global standards.Photo by Louie Nicolo Nimor on UnsplashTravel ruleIn December of last year, the Financial Action Task Force (FATF), a global money laundering and terrorist financing watchdog based in Paris, France, deemed that the approach taken to crypto-related AML in Japan fell short of international requirements and best practice.Specifically, it’s the FATF’s “travel rule” that the Japanese are about to implement. Otherwise known as FATF Recommendation 16, the travel rule is a set of guidelines devised to prevent both terrorist financing and money laundering.The measure puts an onus on all crypto companies to screen all crypto transactions that exceed the value of $1,000 or a variance of this amount based on implementation by each FATF member state. As an example, in the United States, the FATF travel rule is being implemented with transaction monitoring being applied on transactions to the value of $3,000 and above.Once identified, the crypto firm must record details of the transaction and communicate that information, including both sender and recipient data, to the authorities. That would involve the sender and receiver’s legal names, their account numbers, and addresses. Relevant transaction activity includes exchanges between one or more forms of digital currency and the transfer of virtual assets.G7 alignmentThe move follows a decision taken at a Japanese cabinet meeting on Tuesday, as a direct response to FATFs recommendations. Following discussions earlier this month, the intergovernmental political forum of the G7 group of countries indicated its support for the FATF’s call for the establishment of the travel rule as a global standard. Japan is currently leading the group through its G7 presidency and likely wants to align with the views of its international peers.The country had been moving towards travel rule implementation in the past but in a less decisive way. Two years ago, Japan’s Financial Services Agency (FSA) requested virtual asset service providers (VASPs) to implement the travel rule. In a self-regulatory approach in 2022, the country’s Virtual Currency Exchange Association issued a recommendation for members to apply the rule.Those approaches lacked teeth, leading to a cabinet decision to amend existing legislation late last year and this more recent move to apply and enforce the rule.Regulatory frameworkWhile Japan may not be top of the class in terms of AML regulation relative to crypto, it is a forerunner in terms of crypto regulation generally. It was the first country in the world to suffer a serious crypto-related failure when the Mt.Gox cryptocurrency exchange collapsed in 2014.The fall-out from that collapse led to the Japanese introducing more stringent regulations although it took until 2017 to get them implemented. As a consequence, when the next major collapse occurred, the fall of FTX in November 2022, the Japanese have fared much better than investors located elsewhere. Regulation meant that a separate Japanese entity, FTX Japan, was established. It had to adhere to stricter conditions, meaning that FTX Japan customers have been allowed to withdraw their funds since February while their international counterparts must undergo a much longer process to recover their funds.

South Korean brokerage firms are expanding into the security token offering (STO) space, a sector gaining attention ahead of the upcoming presidential election in June. Photo by Raymond Yeung on UnsplashDedicated STO divisionsAccording to local outlet Kukinews, major players like Mirae Asset Securities, Hana Securities and Shinhan Securities are either establishing dedicated STO divisions or partnering with tokenization platforms to stay ahead of the curve. Some are also exploring fractional investment opportunities tied to real-world assets (RWAs) such as real estate, art and music copyrights. Security tokens are blockchain-based digital assets that represent rights to real-world assets (RWAs) and, as the name suggests, are classified as securities. The financial industry is increasingly interested in this technology for its potential to accelerate digital transformation. However, trading such tokens requires a comprehensive legal framework—something that is currently lacking in Korea. Election renews STO interestSTOs have resurfaced as a key topic, with presidential candidates from both the left and right likely to include them in their campaign agendas. The renewed interest follows the ousting of President Yoon Suk-yeol earlier this month, after the Constitutional Court upheld his impeachment by the National Assembly over his declaration of martial law. Before the presidential election became imminent, legislative discussions around STOs had stalled in the National Assembly and received little attention. Among the standout moves made by presidential hopefuls, Lee Jae-myung, a primary candidate from the Democratic Party of Korea (DPK), recently added Kim Yong-jin, an STO expert and professor at Sogang University, to his policy advisory group. Meanwhile, lawmakers across party lines have introduced amendments to the Electronic Securities Act and the Capital Markets Act, aiming to establish a regulatory framework for STOs, according to the National Assembly’s National Policy Committee. This regulatory shift in political circles favoring STOs has been anticipated by the financial industry. An unnamed official from a brokerage firm predicted that presidential candidates will propose measures such as legalizing security tokens, advancing a regulatory framework for virtual asset service providers (VASPs), promoting investment in crypto-related businesses and permitting the use of stablecoins. Some observers even expect these bills to receive final approval within the year. Brokerage meets blockchainKorean securities firms' push into the STO space is further highlighted by a recent partnership between Shinhan Securities and the Solana Foundation.According to Yonhap, the two parties signed a memorandum of understanding (MOU) to collaborate on expanding the digital asset ecosystem. Their cooperation will focus on STOs, RWAs, crypto custody infrastructure, stablecoin payments for both online and offline use and responses to global policies and regulations.