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Korean Financial Authority Orders Suspension and Levies $1.4M Fine on Crypto Lender DelioDelio, a cryptocurrency lending company based in South Korea, has received a directive from the financial regulatory authority to cease its operations for a duration of three months, according to local news agency Yonhap. Additionally, the company has been levied with a fine amounting to KRW 1.896 billion ($1.4 million).Photo by Riva Ferdian on UnsplashExecutive dismissal recommendedThis announcement was made on September 1 by the Financial Intelligence Unit (KoFIU) under the South Korean Financial Services Commission. In addition to the measures mentioned above, the KoFIU advised the company to remove one of its executives.As a virtual asset service provider (VASP) registered with the financial regulatory authority, Delio offered deposit services with an annual yield reaching up to 10.7%. However, in June of this year, the company abruptly halted its withdrawal services, prompting investigations conducted by both the KoFIU and public prosecutors.Involvement with unregistered VASPsThe KoFIU saw that Delio had engaged in trading activities with unregistered VASPs and had also breached the restrictions on the trading of affiliate-issued virtual assets. These actions are prohibited under the Financial Transaction Information Act.The financial authority identified a total of 171 instances in which Delio facilitated the transfer of its customers’ virtual assets to unregistered VASPs located outside the country. Additionally, the authority also uncovered the company’s engagement in storing the virtual assets of unregistered VASPs.It was also discovered that Delio had not only neglected to assess the risks of money laundering before introducing new products or services but had also failed to fulfill Know Your Customer (KYC) obligations.

Recently, the top five Korean banks have seen a significant outflow of funds in their demand deposits – worth about KRW 2 trillion ($1.52 billion) – to crypto markets as local investors are rushing to withdraw their money from banks to invest in the crypto and stock markets. The recent surge of Bitcoin to KRW 100 million prompted the funds’ outflow, local media Etoday reported. This is a substantial turn from just a week ago, when these banks saw a KRW 23.5 trillion increase in their demand deposits just in a month.  The previous rise in demand deposits at banks, however, was also driven by local investors who used these accounts as a “station” to temporarily store their money for future crypto investments. These accounts are highly liquid, since users can deposit or withdraw funds at any time without incurring penalties from banks.Photo by Emile-Victor Portenart on UnsplashBank deposits flowing into crypto Data from the five banks –  KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH Nonghyup Bank – show that their combined demand deposits totaled KRW 612.4 trillion on Friday, down KRW 2.2 trillion from late last month.  The crypto investing trend has prompted investors to withdraw their funds not only from demand deposit accounts, but also from fixed deposit and installment savings accounts. During the same period, the five banks’ fixed deposits saw a KRW 5.1 trillion decline from KRW 886.2 trillion to KRW 881 trillion, with installment savings decreasing by KRW 2.5 trillion, from KRW 33.2 trillion to KRW 30.6 trillion.  In particular, NH Nonghyup Bank, which offers real-name accounts to the crypto exchange Bithumb, has witnessed a decline of over KRW 2 trillion in its demand deposits over the past week. Shinhan Bank also reported an increase in dealing with more crypto assets.  Bullish crypto and stock market With Bitcoin prices hitting a new high, the U.K. bank Standard Chartered forecasts that Bitcoin could eventually reach $200,000 by 2025. The excitement around crypto has boosted the amount of cryptocurrencies traded against the Korean won across the top five crypto exchanges in Korea, reaching KRW 78 trillion.  Korean stock markets are also signaling a bullish sentiment, with the amount of investor deposits exceeding KRW 53 trillion this month. Investor deposits refer to customer deposits at securities companies saved for investment purposes or those left unclaimed after selling stocks.  Declining interest rates Meanwhile, local savings products with over 4% interest rates are no longer to be seen. According to the Korea Federation of Banks, a one-year savings product with the highest interest rate among the top five local banks offers an annual rate of 3.55%.  Online-only banks, which typically offer relatively higher rates than other traditional banks, are rapidly lowering rates on their saving products. The highest annual rate for Kakao Bank’s fixed deposits products stands at 3.5%, down by 0.1 to 0.2 percentage points depending on their maturity.  Kbank has also decreased rates for fixed deposits by 0.05 percentage points, lowering the rate for its flagship fixed deposits product from 3.7% to 3.65%. 

Hong Kong and the UAE Collaborate on Crypto RegulationHong Kong and the United Arab Emirates’ (UAE) central banks have announced a collaboration to work on cryptocurrency regulations and financial technology development. The move is significant insofar as both territories have been making headway in developing global crypto hubs over the course of the past six months.Photo by Nick Fewings on UnsplashStrengthening cooperationFollowing a meeting on Monday, the Hong Kong Monetary Authority (HKMA) and the Central Bank of the UAE published a statement on Tuesday, in which they set out the areas of cooperation between them. They agreed to strengthen cooperation on “virtual asset regulations and developments.”The central banks also expressed their commitment to facilitating discussions on joint fintech development initiatives and the sharing of knowledge through their respective innovation hubs.Financial infrastructureDuring the meeting, the officials highlighted the importance of financial infrastructure and financial market connectivity between the two jurisdictions. The Governor of the Central Bank of the UAE, H.E. Khaled Mohamed Balama, expressed his anticipation for an ongoing and long-term relationship with the HKMA.HKMA’s Chief Executive Eddie Yue echoed this sentiment, emphasizing that both regions share many complementary strengths and mutual interests, which will contribute to the economic benefits of the collaboration.In addition to the meeting, a seminar was organized for senior executives from banks in Hong Kong and the UAE. The seminar covered various topics, including improving cross-border trade settlement and exploring how UAE corporations can leverage Hong Kong’s financial infrastructure platforms to gain access to Asian markets.This collaboration comes at a time when the Securities and Futures Commission (SFC) in Hong Kong is allowing virtual asset service providers (VASPs) to cater to retail investors starting from June 1. Christopher Hui, the Treasury Chief of Hong Kong, emphasized that virtual assets are here to stay and acknowledged the fundamental value they bring. Hui also stressed the importance of regulation to harness the positive elements of cryptocurrencies while mitigating potential risks.Since the announcement of the application process by the SFC, several cryptocurrency exchanges, including CoinEx, Huobi, BitMEX, and OKX, have filed applications to provide dedicated crypto trading services in Hong Kong.FAFT travel ruleThe collaboration between the central banks of Hong Kong and the UAE marks a significant step in the global development of cryptocurrency regulations and fintech innovation. The move is demonstrative of ever improving levels of international cooperation on digital assets worldwide.Both jurisdictions are moving forward with the implementation of the Financial Action Task Force’s (FATF) travel rule. The UAE issued new guidelines in that respect on Tuesday. Hong Kong has gotten a head start in this respect, with the implementation of the travel rule through the introduction of the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill in December 2022.By leveraging their respective strengths and knowledge-sharing efforts, these regions aim to foster a conducive environment for the growth and adoption of digital assets. With increased financial infrastructure connectivity and joint initiatives, both jurisdictions are poised to benefit economically from this collaboration in the long run.