Hong Kong criminalizing promotion of unlicensed stablecoins

Internal Dispute Sees Co-Founder Depart 5ire5ire, the Dubai-based blockchain platform, is facing a departure of one of its co-founders, Vilma Mattila, due to an internal dispute with her fellow co-founders.In discussion with Tech in Asia, Mattila confirmed her upcoming resignation, stating that she disagreed with the management and financial decisions made by the other co-founders without her consent. The exact timeline of her departure was not disclosed.Photo by bady abbas on UnsplashIndian originsMattila, who was already recognized as an angel investor, co-founded 5ire alongside Indian nationals, CEO Pratik Gauri and CTO Prateek Dwivedi. The company gained attention last year after a successful series A funding round that valued it at a remarkable $1.5 billion, establishing its status as a blockchain unicorn.While the start-up project has established itself in Dubai, its origin story leads back to India. In 2022, 5ire entered into a partnership with the Indian government via Atal Tinkering Labs (ATL). ATL is running an initiative to create and promote a culture of innovation and entrepreneurship in India. As part of that program which is being run in more than 10,000 Indian schools, 5ire collaborated with ATL to provide a blockchain module.Although headquartered in Dubai, the project still maintains that it is “a network of local developer communities established in various cities across India.” It has also been active in the country that makes for its administrative home. Last month, Abu Dhabi University in the United Arab Emirates hosted its first 5ire Web3 and blockchain hackathon.The university had signed a Memorandum of Understanding (MoU) with 5ire in February, with a view towards strengthening blockchain education, research and entrepreneurship, while maintaining a focus on sustainability and accessibility.$100 million raiseIn July 2022, it emerged that 5ire had raised $100 million from the UK-based Sram & Mram Group, an international conglomerate that concerns itself with projects in South and Southeast Asia. It got $10 million on signing the deal, with other tranches to follow. As of January, it had called off $20 million of that funding.5ire is positioning itself as “the world’s first blockchain unicorn with sustainability at its core.” The project seeks to align itself with the Sustainable Development Goals (SDGs) set out by the United Nations. It’s a layer one EVM-compatible smart contract platform that focuses on the development of a for-benefit blockchain ecosystem, aligned with the United Nations SDGs.Working towards mainnet releaseThe company has been diligently working on the development of 5irechain, a blockchain designed around the principles of the “Fifth Industrial Revolution,” from which the company derives its name. The launch of its mainnet is anticipated to take place in the coming quarters. In November 2022, it launched its Thunder (Alpha) testnet. Testnet Thunder (Beta) went live in February of this year.As the departure of Vilma Mattila unfolds, the future direction and leadership of 5ire will come under scrutiny. It remains to be seen how this internal dispute will impact the company’s progress and reputation in the blockchain industry.

The Korea Customs Service (KCS) is preparing to establish a dedicated task force to combat the surge in cryptocurrency-related crimes. According to a report by local media outlet Joseilbo, this initiative was deliberated in a meeting chaired by KCS Commissioner Ko Kwang-hyo, specifically convened to discuss strategies against foreign exchange violations. The KCS reported that last year, it uncovered a total of 198 criminal incidents related to foreign exchange activities, with the combined value reaching approximately KRW 1.9 trillion ($1.4 billion).Photo by Mathew Schwartz on UnsplashCrypto involved in 88% of forex violations Of the total amount mentioned, violations of the Foreign Exchange Transaction Act comprised KRW 1.654 trillion, with 88% of these incidents involving virtual assets. This represents a dramatic surge in the involvement of virtual assets in financial crimes, especially when compared to 2020, where crypto-related offenses constituted 3% of the total value linked to forex violations. This trend underscores the rapidly growing role of virtual assets in such illicit activities. To address these issues, the KCS is set to broaden its crackdown on illicit cryptocurrency activities. This crackdown targets practices such as transferring foreign currency overseas to acquire virtual assets for arbitrage trading and using virtual assets to conceal trade payments, thereby attempting to bypass customs duties.Task force’s international collaborationAs part of this initiative, the country's customs agency aims to build a task force focused on tackling crypto crimes. This specialized group will be responsible for gathering and analyzing data, conducting investigations and recommending regulatory enhancements. The task force will collaborate with financial regulators to obtain crypto transaction records from domestic cryptocurrency exchanges. Moreover, it will work with customs authorities of other countries, including Hong Kong, to collect details on crypto transactions conducted abroad. 

Korea to Tighten Scrutiny of Crypto Exchange Shareholders Amid Rising ConcernsSouth Korea’s financial regulator is stepping up efforts to evaluate the qualifications of majority shareholders of cryptocurrency exchanges, according to a report by local news outlet Newsis. This initiative follows instances where majority shareholders of local exchanges, including Bithumb, found themselves embroiled in criminal proceedings. Drawing parallels with the banking sector, the regulator is scrutinizing the credentials of majority shareholders to ensure compliance and integrity within the cryptocurrency exchange landscape.Photo by Terrence Low on UnsplashRevamping reporting requirementsThe Financial Intelligence Unit (FIU) under the Financial Services Commission recently set up a task force to revamp the reporting requirements for crypto exchanges.The upcoming requirements are anticipated to be integrated into the reporting forms that cryptocurrency exchanges must complete, starting in October of next year. Essentially, these stipulations will determine whether existing exchanges, such as Upbit, Bithumb, and Coinone, can sustain their operations in the future.Periodic evaluationAccording to the Enforcement Decree of the Financial Transaction Reports Act, all virtual asset service providers (VASPs), including exchanges, are mandated to submit a renewal report every three years. Upbit, having been the first to submit its initial report in October 2021, will join other crypto exchanges in updating their reports in October 2024.A majority shareholder qualification assessment is a process in which the government periodically checks whether majority shareholders have the necessary qualifications to operate a financial company. Through this process, the FIU aims to curb potential illicit activities by majority shareholders, who hold significant sway over cryptocurrency exchange operations, thereby mitigating any potential harm to the users.Regulatory grey areaThis measure emerged from concerns that majority shareholders of exchanges have existed in a regulatory grey area. In fact, under the Financial Transaction Reports Act, only exchange representatives and registered officers are required to report and undergo examination when declaring VASPs. This leaves the actual owners and controllers — the majority shareholders — unidentified and unexamined.The current circumstances involving VASPs are markedly different and more concerning compared to other financial sectors. In the banking sector, restrictions are placed on share ownership and voting rights if majority shareholders have breached financial laws or if they are capital entities forbidden from owning a bank. Similarly, online peer-to-peer lenders and large lenders are also under obligation to have their majority shareholders scrutinized, as they fall under analogous regulations.Fraud and manipulation allegationsThe heightened scrutiny is also thought to have been sparked by recent allegations of fraud and market manipulation involving some majority shareholders of Korean exchanges. For instance, Mr. Kang Jong-hyun, a majority shareholder of Bithumb, is currently facing a criminal trial for allegations of fraudulent and unfair trade activities under the Capital Markets Act. Additionally, Song Chi-hyung, the majority shareholder of Upbit and chairman of Dunamu, is facing a Supreme Court trial over alleged price manipulation through wash trading.Moves to amend legislationMeanwhile, efforts are underway in the National Assembly to amend the existing legislation. Yun Chang-hyun, a lawmaker from the ruling People Power Party and a member of the National Policy Committee, has recently proposed a bill to revise the Financial Transaction Reports Act. The amendment seeks to implement a majority shareholder screening system for VASPs.The proposed amendments would obligate VASPs, including crypto exchanges, to disclose information about their majority shareholders in their reports, thereby enabling the FIU to scrutinize any past financial crimes or economic offenses committed by these majority shareholders.