HAQQ Network co-founder points to Indonesia’s crypto hub potential

Exploring the motivations behind Crescendo’s multi-million dollar investment in LINE NEXTIn a move that has made headlines as the largest investment made in the Asian blockchain and Web3 industry this year, Seoul-based private equity firm Crescendo Equity Partners has decided to invest $140 million in LINE NEXT, the NFT business arm of Tokyo-based Internet giant LINE Corporation. According to South Korean news outlet DealSite, this can be seen as a strategic decision to leverage LINE’s global network, which dominates the Japanese market. Considering Crescendo’s track record of successful investments in various IT companies, the industry is keen to see whether the firm can replicate this success in the rapidly growing blockchain sector.Photo by Pepi Stojanovski on UnsplashConsortium takes controlAccording to the South Korean Financial Supervisory Service’s (FSS) Data Analysis, Retrieval and Transfer (DART) System on Thursday (local time), Crescendo’s special purpose company (SPC) established to manage the LINE NEXT investment dubbed Ludwig Holdings will act as a third party in the investment by providing KRW 130 billion in paid-in capital. Other financial investors will also contribute KRW 52 billion through a consortium formed with Crescendo, bringing the total investment amount to KRW 182 billion, or approximately $140 million.As a result of this capital increase, 795,401 new shares will be issued. Crescendo’s consortium will thus secure a 50% stake plus one more share, making it the largest shareholder group. However, among individual shareholders, LY Corporation will maintain its position as the single largest shareholder. The existing number of shares was 795,400. Crescendo plans to utilize its third fund, which raised KRW 1.1 trillion in 2021, to provide the funds by next February.Smooth transitionAlthough the consortium has become the largest shareholder group, there is no indication of an immediate change in LINE NEXT’s current management board. This decision is likely because blockchain development companies should be run by executives who are familiar with the unique ins and outs of the blockchain industry. The firm’s current CEO, Ko Young-su, is an IT expert who had been responsible for financial technology (fintech) operations at LINE Corp.Web3 expansionThrough the investment, LINE NEXT plans to popularize Web3 by expanding its global platform and developing new services. This includes DOSI, a global mobile NFT marketplace app for trading digital products, which will be integrated with LINE’s Japanese NFT marketplace LINE NFT. DOSI’s launch is scheduled for January next year.Navigating uncharted territoryMany believe that LINE NEXT’s ambitions for dominating the blockchain sector aligning with Crescendo’s tradition of investing in promising IT companies is sufficient justification for the major funding decision. However, some observers find the development surprising, considering the fact that it is rare for private equity firms in Korea to make such large investments in blockchain firms — an industry that has mostly been an unpopular choice for investors, likely due to its close association with crypto assets. Indeed, Crescendo’s interest in the company may have been partly driven by the fact that it is more focused on blockchain technology itself rather than crypto.“Crescendo seems to have focused on LINE’s global network, which pushed it to invest in its subsidiary. Considering the popularity of NFTs and other related projects last year, expanding this area of business seems plausible,” said an anonymous source from the investment banking industry. “Peter Thiel [the billionaire entrepreneur and venture capitalist who sponsored Crescendo] is known to have a keen interest in blockchain technology and is actively making investments in the sector, which probably made the decision-making process much smoother.”This development signifies yet another shift in the evolving business landscape, where parts of the industry that have not been traditionally associated with blockchain are increasingly recognizing the potential of its role in the future of industry and technology.

Strengthened KYC Spurs More Suspicious Transaction Reports from Korean Crypto ExchangesIn South Korea this year, there has been a significant surge in the number of suspicious transaction reports (STRs) related to cryptocurrencies, according to local news agency Yonhap.This increase is primarily attributed to cryptocurrency exchanges fortifying their Know Your Customer (KYC) procedures. This proactive response follows the controversy surrounding lawmaker Kim Nam-kuk’s significant virtual asset holdings, which were unveiled in May. His scandal came to light when a substantial amount of WEMIX tokens, valued in billions of Korean won, were transferred from the Bithumb exchange to the Upbit exchange. Upbit, deeming it a suspicious transaction, promptly reported the matter to the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC).Photo by ron dyar on UnsplashGrowing number of suspicious transaction reportsAs the scandal continued to gain traction, the political realm reached a consensus to conduct investigations into the cryptocurrency holdings of all lawmakers. Additionally, the National Human Rights Commission of Korea initiated the tracking of all lawmakers’ cryptocurrency holdings last month, a process set to span 90 days.Data received by lawmaker Yoon Young-deok on October 30 from the FIU reveals that the number of STRs originating from virtual asset service providers (VASPs) has reached 11,646 in the first nine months of this year. This figure has already exceeded last year’s total of 10,797 STRs.Under the current Act on Reporting and Using Specified Financial Transaction Information, commonly referred to as the Financial Transaction Reporting Act, VASPs are mandated to report to the FIU if they have reasonable grounds to suspect that a customer’s financial transactions are connected to illicit property, money laundering, or terrorist financing. The Act has been in full effect since October 2021.In 2021, a total of 199 reports were submitted under this Act. The number of reports surged to over 10,000 the following year, and in the current year, it continues to grow at an even faster rate. The FIU reviews and analyzes these STRs in accordance with Article 10 of the Financial Transaction Reporting Act. It forwards the relevant information to law enforcement agencies only when it is deemed necessary for the investigation of a specific criminal case.Enhanced but varied approaches by exchangesCrypto exchanges have bolstered their customer verification requirements, especially for customers deemed to have a high risk of involvement in money laundering, in accordance with the Financial Transaction Reporting Act. This entails the need for additional scrutiny of the source of funds and the purpose behind transactions. Notably, if customer verification appears suspicious, exchanges are mandated to confirm the authenticity of the information using reliable documents.However, it’s important to note that the enforcement decree accompanying this Act grants exchanges the flexibility to verify documents based on their own business guidelines. This autonomy has been provided to assist exchanges in effectively mitigating money laundering risks by taking into account their individual business rights and characteristics.For instance, Upbit, South Korea’s largest cryptocurrency exchange, has implemented a fraud detection system (FDS) powered by artificial intelligence to continuously monitor and identify fraudulent transactions. This initiative has earned Upbit recognition from the FIU as an outstanding organization for reporting suspicious transactions during the first half of this year.On the contrary, Bithumb has devised and applies internal guidelines dedicated to anti-money laundering (AML) measures. The exchange has instituted a streamlined customer verification process for customers who are assessed as having a low likelihood of being engaged in money laundering activities. However, this simplified process is not extended to individuals from countries that have not adopted the recommendations of the Financial Action Task Force (FATF).Korbit monitors information related to customer verification through a dedicated department. It declines transactions for customers who have not undergone sufficient verification and validation procedures.Coinone’s AML department examines customer transactions comprehensively. It maintains ongoing reviews of customer information, business operations, risk assessments, and the source of funds. If any of these aspects are found to be suspicious or inadequate, the AML department proceeds with additional customer verification, including the disclosure of the source of funds.Some raise concerns about the inconsistency in customer verification standards for AML and STRs across different exchanges. When one exchange flags a transaction as suspicious, another might see it as routine. Such discrepancies highlight the need for uniform guidelines. Addressing this, the Digital Asset eXchange Association (DAXA), consisting of Korea’s five leading currency exchanges — Upbit, Bithumb, Coinone, Korbit, and Gopax — has set up an AML division to devise standardized rules for STRs.

LINE NEXT and Sega Join Hands to Develop Web3 Games with NFTsLINE NEXT, the NFT business arm of Tokyo-based messaging app developer Line Corporation, has announced the signing of a memorandum of understanding (MOU) with Japanese game company Sega. This partnership will see LINE NEXT acquiring intellectual property (IP) licenses of Sega’s video game franchises for the purpose of jointly developing Web3 games.Renowned for its iconic Sonic the Hedgehog franchise, Sega boasts studios in Japan and abroad. The Japanese game publisher produces games of various genres on different platforms, including arcade machines, desktop computers, and mobile phones. Sega has gained recognition for creating generational games for international users through innovative ideas and outstanding game development skills.Photo by Shubham’s Web3 on UnsplashWeb3 game popularizationThrough this collaboration, LINE NEXT will introduce Sega-licensed games on its NFT-based gaming platform, GAME DOSI, with the aim of popularizing Web3 games. GAME DOSI will provide functionalities such as NFT creation, easy payment, and marketing. While the specific lineup of games and their details will be revealed at a later date, LINE NEXT CEO Ko Young-su expressed his belief that this MOU with Sega will bring new elements of joy to global gamers, emphasizing that the NFT company is dedicated to delivering readily enjoyable Web3 content not only to Sega fans but to everyone through GAME DOSI.Launched in May, GAME DOSI focuses on user-oriented games with the slogan “Gamer First, Web3 Next.” The platform has recently unveiled several new games, including Sweet Monster Guardians (a village defense game); Vestria the Last Order, also known as V.L.O, (a roguelite role-playing game); and KEROZ (a hack and slash game). Additionally, GAME DOSI is actively involved in Project GD, an initiative aimed at developing a diverse range of games based on its own intellectual properties.LINE NEXT’s NFT endeavorsIn its efforts to attract NFT enthusiasts, LINE NEXT has undertaken various projects. Last month, it introduced DOSI Land, a program that rewards users with the FINSCHIA token (FNSA). FNSA is currently listed on crypto exchanges Bithumb, Bittrex, Huobi, and Gate.io, according to crypto market data website CoinMarketCap.Sega’s blockchain hesitancyMeanwhile, it was reported earlier that Sega has been rethinking its involvement in blockchain gaming. Shuji Utsumi, the Co-Chief Operating Officer of Sega, recently stated in an interview with Bloomberg that the company intends to protect the value of its content by withholding from participating in third-party blockchain gaming projects. Utsumi expressed his belief in the importance of the fun element in games, while he described “play-to-earn” (P2E) blockchain games as “boring.” P2E games refer to those that enable players to earn tokens as rewards for completing specific tasks or winning battles against other players.