Japan’s largest bank collaborates with KlimaDAO on carbon credit marketplace

Korea’s Virtual Asset User Protection Act to Take Effect in July Next YearThe Virtual Asset User Protection Bill was passed during the South Korean National Assembly’s plenary session last Friday, according to a report by news agency Newsis. The legislation aims to safeguard customer assets, establish regulations against unfair trading practices, and enforce penalties. The act is scheduled to take effect one year after its passage.Photo by KS KYUNG on UnsplashDefinition of virtual assetsUnder the act, a virtual asset is defined as a digital representation of economic value that can be digitally traded or transferred. It’s important to note that central bank digital currencies (CBDCs) are not considered virtual assets. Virtual assets with characteristics of securities will initially fall under the jurisdiction of the Capital Market Act.Roles of Korea’s central bankThe act grants the Bank of Korea (BOK) the authority to request data and information from virtual asset service providers (VASPs). This provision is deemed necessary for the Korean central bank to formulate monetary and financial policies, despite virtual assets not being equivalent to traditional currencies.Responsibilities of VASPsMoreover, VASPs are obligated to segregate users’ virtual assets from their own holdings. VASPs are also required to reserve the same type and quantity of virtual assets entrusted by users and maintain a certain proportion of these assets in a cold wallet, which is an offline storage solution.Unfair trading practices will be regulated in a similar manner as outlined in the Capital Market Act. The act specifically prohibits the use of undisclosed information, price manipulation, fraudulent transactions, and trading of self-issued virtual assets. VASPs are barred from suspending deposits and withdrawals without legitimate reasons. They are also mandated to monitor suspicious transactions and take appropriate measures to safeguard users. Any suspected unfair trading practices must be promptly reported to financial authorities. Violators of these rules may face criminal penalties, liability for damages, and potential class action lawsuits.Powers of financial authoritiesThe act also clarifies the powers of financial authorities in supervising, inspecting, and taking action against virtual asset operators. Unfair trade practices can result in imprisonment for more than one year (up to 10 years for violations related to self-issued virtual assets) or fines ranging from three to five times the illicit gains. Assets acquired through unfair trade practices will be confiscated, or an equivalent value will be charged if confiscation is not feasible.Impact on crypto investigationsThe absence of legislation directly addressing unfair trading practices in the virtual asset market has posed challenges for prosecutors. They had to rely on existing statutes related to fraud, the capital market, and financial investments. Once the new act takes effect, prosecutors will no longer need to determine whether a virtual asset qualifies as a security or not.Regarding this development, a prosecutor told local legal news outlet Law Times that the implementation of the new act will escalate prosecutorial investigations into cryptocurrency incidents.Meanwhile, the individuals behind the crash of Terraform Labs’ stablecoin TerraUSD and its sister coin Luna will not be subject to this act due to the legal principle of nulla poena sine lege, which prevents the retrospective enforcement of criminal laws. Do Kwon, co-founder of Terraform Labs, was recently sentenced to four months in prison by a Montenegrin court for passport forgery after being arrested in March. The other co-founder, Daniel Shin, has been indicted by prosecutors in Korea.

Regulated blockchain and digital asset solutions provider Paxos has announced the launch of its latest digital asset, the Global Dollar (USDG), a U.S. dollar-backed stablecoin. The company outlined in a press release published to its website on Nov. 31 that the USDG stablecoin is being issued by its local Singaporean corporate entity, Paxos Digital Singapore Pte. Ltd., with the product being regulated by the Monetary Authority of Singapore (MAS).Photo by Alexander Grey on UnsplashMAS compliant offeringThe company claims that the offering is “substantively compliant” with the stablecoin regulatory framework that MAS intends to roll out imminently. Paxos paved the way for this latest product offering back in July when it obtained a Digital Payment Token license from MAS, enabling it to issue U.S. dollar-backed stablecoins within the city-state. In terms of distribution, Paxos intends to partner with global crypto exchanges, wallets and platforms in an effort to get this new product out into the market.  DBS Bank partnershipIts first partnership with regard to the Global Dollar has already been struck with DBS Bank, Singapore and Southeast Asia’s largest bank based on assets held. DBS will play a role in the custody of USDG reserves and in cash management relative to the project.  Ronak Daya, Head of Product at Paxos, said that “USDG offers a trusted solution with a top-tier banking partner in DBS that will be the catalyst to drive stablecoin innovation and enterprise adoption at a global scale.” This latest product launch appears to be similar to the approach the company has taken in the Middle East. Back in June a United Arab Emirates (UAE)-based affiliate company launched the Lift Dollar (USDL), a yield-generating U.S. dollar-backed stablecoin under the regulatory oversight of the Financial Services Regulatory Authority (FSRA), the regulator within the Abu Dhabi Global Market (ADGM) free zone and international financial center. Running on EthereumThe USDL stablecoin started out on the Ethereum network, with it launching on the Arbitrum network in October. A similar roadmap has been set for USDG, with it launching on Ethereum while Paxos maintains that it “will be issued on more blockchains in the near term.” The Stellar network is likely to be one that it expands to in the future. In October the firm announced an integration with the Stellar Development Foundation, with a view towards expanding stablecoin adoption. Daya said that “enterprise interest in stablecoins has never been higher than it is today, but the market lacks a solution that combines regulatory compliance with real economic incentives for enterprises.” The company has developed an expertise in the issuance of digital assets, with USDG being its sixth such issuance. Last week Paxos outlined that it had launched a stablecoin payments platform with the objective of simplifying global transactions for payments providers and merchants. Paxos has also partnered with the Trump family venture, World Liberty Financial, which plans on launching a U.S. dollar stablecoin with the help of Paxos. The firm’s CEO, Charles Cascarilla, also encouraged both U.S. presidential candidates recently to embrace stablecoins as a mechanism through which to safeguard the continuing influence of the U.S. dollar on a global basis. 

China’s Legal Daily, a publication that falls under the supervision of the Chinese Communist Party’s (CCP) Central Commission for Political and Legal Affairs, has sounded an alarm regarding cryptocurrencies, raising concerns about their use as potential avenues for corruption. In the newspaper’s New Year’s Day edition, it quoted legal scholars, who had convened at the annual China Integrity and Legal Research Association meeting, who underscored the urgency of addressing the emerging threat posed by digital assets.Photo by Max van den Oetelaar on Unsplash‘Hidden channels’ for briberyIn particular, it focused on views expressed by Associate Professor Zhao Xuejun from Hebei University Law School. Zhao Xuejun warned against the use of virtual currency and electronic gift cards as “hidden channels” for bribery. Notably, these forms of payment, often stored in “cold storage” devices, offer a convenient means for transporting funds abroad, the academic claimed. This development aligns with recent warnings from state agencies, including the Supreme People’s Procuratorate and the State Administration of Foreign Exchange, cautioning against the use of stablecoin Tether in yuan-related foreign exchange transactions, deeming such actions illegal. Anonymity and traceability concernsProfessor Mo Hongxian from Wuhan University Law School explicitly mentioned Bitcoin, highlighting the challenges associated with virtual currencies, such as their anonymity and difficulty in traceability, which can facilitate illegal activities. Despite lacking official recognition in China, Professor Hongxian stressed the need for judicial attention to transactions involving virtual currencies. Although China maintains a cryptocurrency ban, it actively explores blockchain technology for identity verification. The country’s central bank digital currency, e-CNY, still in the pilot stage, has witnessed significant development. Despite its limited geographic distribution, the digital yuan recorded transactions totaling nearly $250 billion in China as of June 2023, with international use noted in commodities sales. Varying degrees of enforcementChina has demonstrated that it can at times take a very hard line on restricting cryptocurrency trading and related activities, while at others, it seems to tolerate such activity or turn a blind eye. Last month China’s Supreme Procuratorate provided details on the nature of the prosecution of over-the-counter (OTC) crypto trader and RenrenBit founder, Zhao Dong. Zhao was handed down a seven year sentence for carrying out illicit crypto business operations. By contrast, an investigation carried out by the Wall Street Journal last year found that business has been thriving for the world’s largest cryptocurrency exchange Binance in China, despite the ban. Other crypto-related activity has been uncovered, flouting capital controls. BitMEX founder Arthur Hayes suggested recently that all wealthy Chinese individuals have access to banking in Hong Kong, allowing them to access, trade and use cryptocurrency. As part of the CCP’s intensified anti-corruption efforts, the focus on cryptocurrency’s potential role in financial crimes underscores the evolving landscape as use of digital currency unfolds. The Legal Daily article emphasizes the need for vigilance and regulatory measures to counteract the perceived threat of corruption facilitated by cryptocurrencies and electronic payment methods.