China’s JD.com to apply for stablecoin licenses in key markets

The Legal Future of South Korea’s Crypto Industry: Necessary Legislation and SystemsA recent National Assembly symposium organized by South Korea’s Digital Asset Policy Forum brought experts together to discuss the challenges and prospects of the implementation of the Virtual Asset User Protection Act at the National Assembly Members’ Office Building in Seoul on Tuesday.Photo by Tingey Injury Law Firm on UnsplashInternational modelsReferences were made to global examples, such as the Markets in Crypto-Assets Regulation (MiCA) — the world’s first standalone virtual asset legislation enacted in the EU — which ensures transparency, disclosure, authorization, and supervision of crypto-asset transactions. However, unlike the capital market, MiCA does not impose regular disclosure reporting requirements or corrections on them. Firms in Japan, on the other hand, are asked to provide disclosure under autonomous regulation through the Japan Virtual and Crypto Assets Exchange Association (JVCEA).Notably, in its recent Policy Recommendations for Crypto and Digital Asset Markets Consultation Report, the International Organization of Securities Commissions (IOSCO) states that it is “seeking to encourage optimal consistency in the way crypto-asset markets and securities markets are regulated within individual IOSCO jurisdictions, in accordance with the principle of ‘same activities, same risks, same regulatory outcomes’.” This principle refers to the concept that any crypto-asset activity that has a similar function and poses similar risks to those in the traditional financial system — such as operating a trading platform or providing custody services — is subject to regulation that ensures equivalent outcomes, as defined by the UK Parliament.The IOSCO report also suggests that crypto-asset service providers (CASPs) should disclose information regarding ownership and control of crypto-assets, issuer and business-related information, issuer management teams, transaction history and operational description of crypto-assets, token ownership concentration, transfer protocols, and a given CASP’s treatment of the client crypto-assets and their respective rights and entitlements during events like hard forks and airdrops.Hurdles to overcomeExperts at the forum reflected these considerations in their sentiments. Han Suh-hee, a lawyer at Barun Law Firm, emphasized that it is important to determine what kind of information should be disclosed. She argued that it is necessary to discuss to what extent information about virtual asset issuers should be disclosed and whether mandating firms to disclose their financial and business conditions is efficient.In particular, Han underlined the need to consider the differences between virtual assets and stocks when establishing a framework for the disclosure of virtual assets holdings. Unlike stocks, virtual assets possess distinctive characteristics like their borderless and decentralized nature, unclear issuer backgrounds, and the ability to conduct peer-to-peer (P2P) transactions.Lee Han-jin, a lawyer at Kim & Chang Law Firm, added that the enactment of Korea’s Virtual Asset User Protection Act was aimed at establishing a system directly targeted at regulating virtual assets and virtual asset service operators (VASPs) — a significant development from the Financial Transaction Reporting Act, which had until now been the only legal framework responsible for regulating VASPs along with other entities like casino business operators. Virtual assets are now subject to a more systematized regulatory approach.However, he said that the Virtual Asset User Protection Act still has its setbacks because it is undergoing a two-stage legislative process. Lee criticized the fact that the same definition of VASPs outlined in the Financial Transaction Reporting Act had been brought over, which limits their identity to transaction intermediaries, wallet operators, and custodians while overlooking their other roles like crypto management, crypto deposits, and crypto collective investments.Lee also pointed out another weakness: the scope of prohibition on using undisclosed information and market manipulation is broader in the Virtual Asset User Protection Act than in the Capital Markets Act. He argued that enforcement decrees should stipulate the definition of insiders and exceptional cases when deliberating on the prohibition of insider virtual asset trading.Lee thus emphasized the need for a clear definition of virtual assets in the Virtual Asset User Protection Act, as it is yet unclear whether they are objects or assets. All things considered, he believes there must be a law that can encompass blockchain-based decentralization, outline the similarities and differences between digital assets and financial products, and accommodate new services that utilize smart contracts.“We are in the process of creating a regulatory system similar to those being adopted in other countries based on their respective markets,” said Lee Seok-ran, head of the Financial Innovation Bureau at the Financial Services Commission (FSC). “Unlike the stock market, which is equipped with regulations to prevent fraudulent transactions and misconduct, virtual assets are traded on multiple exchanges, so we are considering how to interpret unfair trading activities and conduct market surveillance.”She explained that the commission is prioritizing user protection measures and subordinate regulations. “I believe we will be able to create a system for subordinate regulations on disclosure once an overall global trajectory is established. But before that happens, we are working on guidelines for defining unfair trading activities with regulators and the Digital Asset eXchange Alliance (DAXA).” Unfair trading activities associated with virtual assets include not only those conducted on exchanges but also under other circumstances.The FSC officer said that the financial authority is set to establish legal criteria to distinguish cases such as false statements in white papers of crypto projects. She added that enforcement decrees will define both the conditions for restricting deposits and withdrawals on crypto exchanges and the corresponding limits.

Gate.io Shrugs Off Withdrawal Concerns Amid Multichain CrisisGate.io, a prominent cryptocurrency exchange, has refuted rumors circulating within the crypto community about withdrawal issues on its platform. On Wednesday, the exchange reassured users that its operations remain unaffected by recent events.Photo by Keller Chewning on UnsplashGate.io confirms smooth operationsGate.io is one of the oldest Chinese Bitcoin exchanges. It moved its corporate headquarters to the Cayman Islands once the Chinese authorities took a hardline stance on cryptocurrencies a few years ago. It also maintains offices in Seoul, South Korea, and is currently preparing to launch a bespoke Hong Kong-based platform.According to the exchange, withdrawals are functioning properly, and the overall operations of the exchange are healthy. It explicitly stated, “There are no issues with our operations or withdrawals as rumored.”Multichain concernsSpeculation emerged on social media on May 24 when Arkham Intelligence reported that members of the separate blockchain project Multichain had transferred $3 million worth of the $MULTI token to Gate.io. Arkham also mentioned other transactions involving Multichain-related tokens, some of which were subsequently suspended for deposit on the leading exchange, Binance.While Arkham did not directly suggest any risks to Gate.io itself, the combination of market activity and other events led to rumors. ‘Coinsumption,’ a Twitter account with nearly 31,000 followers, suggested on May 31 that Gate.io might be facing insolvency problems and advised users to withdraw their funds from the exchange.The ongoing issues with Multichain may well be unrelated to Gate.io. Multichain’s team members recently stated that they are unable to contact their CEO or access project servers. The project has experienced transaction delays over the past few days.Native token price impactGate.io’s native token ($GT) has reportedly been affected by these rumors, as its value has declined by 6.59% over the past 24 hours. In contrast, Bitcoin has only experienced a 1.4% decrease.The $GT token losses can be attributed, in part, to a period of several hours during which the token’s price dropped from $4.92 to $4.49. In isolation, this change represents an 8.7% loss, although there have been partial recoveries and other fluctuations to offset the decline. At the time of publication, the $GT token unit price stood at $4.36.Despite the recent challenges, Gate.io continues to demonstrate significant trading volume. On the most recent day, the exchange recorded approximately $525 million in trading volume, solidifying its position as one of the largest centralized exchanges with sub-billion daily trading volumes.The almost ten-year-old exchange is among several cryptocurrency exchanges preparing to comply with upcoming regulations in Hong Kong. It aims to operate alongside other platforms, such as CoinEx, OKX, Huobi, and BitMEX, as they adapt to the regulatory framework being implemented in the region.Gate.io has dispelled rumors of withdrawal issues, assuring users that its operations are functioning normally. Notwithstanding that, as with everything in the crypto space, the facts and circumstances can change in an instant. Therefore, it’s a topic that is worthwhile watching as further news emerges relative to ongoing issues on the Multichain project.

China has provided insights into the conviction of Zhao Dong, the influential crypto over-the-counter (OTC) trader and widely known founder of the RenrenBit crypto trading desk. The ‘OTC King’Last Wednesday, China’s Supreme Procuratorate disclosed that Zhao, known as the "OTC King," was handed down a substantial prison sentence for engaging in illegal foreign exchange and crypto business operations. The case is emblematic of China's persistent efforts to clamp down on cryptocurrency trading, even when conducted through less transparent channels like OTC desks, private chat groups and stablecoins.Photo by Hanson Lu on UnsplashTracing fundsIn their comprehensive disclosure, the Chinese authorities outlined the meticulous investigation that led to Zhao Dong's conviction. The focus was on tracing fund movements across Chinese bank accounts, overseas cash pools and the circulation of Tether and Bitcoin. Investigators honed in on accounts associated with Zhao Dong and the chat groups used for trading activities. Their arsenal included detailed bank records, WeChat conversations, testimonies from Zhao's OTC agents and other documentary evidence. The report highlighted that all defendants, including Zhao Dong, confessed to the process of collecting dirhams in cash in Dubai, paying RMB to the other party's designated account, buying Tether with dirhams, and allowing the domestic gang to illegally sell it back for RMB. Seven year sentenceIn one of the alleged schemes, Zhao Dong purportedly orchestrated crypto-fiat trades between Dubai-based entities holding cash piles in United Arab Emirates (UAE) dirhams and Chinese contacts within the country. With numerous related recipients confirming that the funds Zhao received were payments from foreigners, the prosecution's case was made so much stronger. Zhao unsuccessfully argued during three public court hearings that his actions constituted digital currency transactions and not a breach of foreign exchange laws. The prosecution countered with evidence from the group's chat records, emphasizing the nature of foreign exchange in their dealings. The court ultimately rendered a verdict, sentencing Zhao Dong to seven years in prison and imposing a 2.3 million Chinese yuan ($325,000) fine. This conviction serves as a stark reminder of the stringent regulatory stance that China has adopted towards cryptocurrency trading. Zhao Dong was considered one of China's most influential OTC crypto traders. He was a Bitfinex shareholder and founder of the D Fund venture capital fund. He established RenrenBit in August 2018, incorporating the company in Singapore. The influential crypto trader is also believed to have been involved in assisting stablecoin-issuer Tether to launch its Tether Yuan product. However, once the authorities moved against him, RenrenBit was taken offline while Tether scrapped its pursuit of Tether Yuan. Despite his influence, Zhao has ultimately become a symbol of the government's commitment to curbing such crypto trading activities within mainland China. The outcome underscores the severity of China's regulatory crackdown on cryptocurrency trading and sends a strong message to other players in the crypto space within the country.