Understanding South Korea’s won-backed stablecoin debate

Japanese Startup Drives Asian Digital Payment Network InitiativeSoramitsu, a pioneering fintech developer from Japan that focuses on blockchain-based solutions, is spearheading an initiative aimed at constructing a seamless cross-border payment system for Asian countries.Photo by Conny Schneider on UnsplashCBDC project involvementAt the core of this emerging international network is Cambodia’s central bank digital currency (CBDC), Bakong, which has garnered increasing attention for its potential to revolutionize digital payments within the region.Soramitsu has played a pivotal role in facilitating the issuance of Asian CBDCs, supporting both Cambodia’s Bakong and Laos’ Digital Lao Kip. Notably, Bakong has already demonstrated its prowess by facilitating QR code-based digital transactions between Cambodia and neighboring nations such as Malaysia, Thailand, and Vietnam. As of the close of 2022, Bakong boasts an impressive user base of 8.5 million individuals and has facilitated approximately $15 billion in payments.Replicating Cambodian CBDC successTokyo-based news outlet Nikkei reported on Tuesday that the firm’s strategic focus is now on replicating the success of Bakong by enabling comparable cross-border payments between India, China, Laos, and potentially Japan. To this end, Soramitsu’s initial step involves establishing a dedicated Japanese exchange platform for stablecoins.The envisioned system would enable streamlined transactions between countries, converting payments denominated in one CBDC to a stablecoin pegged to the recipient’s currency.Low transaction feesA key advantage of this innovative framework lies in its remarkably low transaction fees. By circumventing conventional interbank networks and intermediary banks, stablecoins can be directly transferred with minimal overhead costs.Although the precise fee structure for the stablecoin exchange remains under consideration, Soramitsu envisions a nominal charge, likely in the range of tens of yen per transaction — a fraction of the cost associated with conventional cross-border transfers.While exchanging stablecoins issued on the same blockchain is straightforward, the challenge arises when dealing with stablecoins issued on disparate blockchains. Soramitsu is actively collaborating with Mitsubishi UFJ Trust and Banking, one of the world’s largest financial services groups, and other prominent partners in Japan to develop the intricate exchange infrastructure necessary to facilitate such cross-blockchain transactions.Japan’s payment landscape received a significant boost in June with the implementation of revisions to the payment law, enabling banks to issue stablecoins. In line with these regulatory changes, local startup JPYC and regional banks are poised to launch yen-denominated stablecoins, some of which are anticipated to debut by 2024.Soramitsu’s vision for constructing a robust cross-border payment network has culminated in the formation of a dedicated project team. Collaborating with Tokyo-based digital services firm Vivit and the Tama University Center for Rule-making Strategies, Soramitsu is also exploring partnerships with major e-commerce platforms to maximize the network’s reach and impact.The underlying motivation is to harness the potential of CBDCs and stablecoins to bridge the gap between Japanese small and medium-sized enterprises and individuals and businesses in Southeast Asia. Given the region’s high smartphone penetration and limited access to traditional banking services, this initiative could prove transformative, granting previously underserved populations greater financial inclusion.

Chinese Court Recognizes Virtual Assets as Legal PropertyAccording to a recent report published by the People’s Courts of the People’s Republic of China, a Chinese court has recognized the legal status of virtual assets, having analyzed their attributes within the framework of Chinese criminal law.The court unequivocally stated that virtual assets are considered legal property under the current legal policy framework and are thus protected by law.The People’s Courts of the People’s Republic of China exercise judicial power independently, free from interference by administrative or public organizations. They have responsibility for adjudicating civil, criminal, and administrative cases.Photo by Christian Lue on UnsplashProperty classificationLocal news source Odaily News reported on the development on Friday, indicating that the report, titled “Identification of the Property Attributes of Virtual Currency and Disposal of Property Involved in the Case,” explicitly recognized the economic attributes of virtual assets, leading to their classification as property.This declaration is particularly significant in light of China’s sweeping ban on decentralized cryptocurrencies. Despite this ban, the report argues that virtual assets held by individuals should enjoy legal protection within the existing policy framework.Furthermore, the report proposed recommendations for addressing crimes involving virtual assets. It emphasized that in cases where money and property are involved, confiscation should be based on the integration of criminal and civil law. The approach taken aims to strike a balance between safeguarding personal property rights while also addressing broader social and public interests.Contentious approach to cryptoWhile China has been making every effort to promote its central bank digital currency (CBDC) and the development of blockchain and metaverse-related technology within the country, its stance on decentralized cryptocurrencies has been contentious at best.Its approach in that respect has been marked by a blanket ban on crypto-related activities such as mining and trading and the prohibition of foreign crypto exchanges from serving customers within mainland China. Nevertheless, Chinese courts have consistently taken a more nuanced view without necessarily contradicting the government’s approach.Differing interpretationsThe divergence between national policy and court rulings first emerged in 2019 when the Hangzhou Internet Court found that Bitcoin is a form of virtual property, and on that basis, it is safeguarded by the law from the point of view of property rights. In May 2022, a Shanghai court affirmed that Bitcoin qualifies as virtual property and, as such, falls under the purview of property rights.Global issueIt’s not just the Chinese courts that are grappling with the issue of clarifying property rights relative to virtual assets. In April of this year, a case in Hong Kong involving defunct crypto exchange Gatecoin resulted in the courts determining that cryptocurrency is property and that on that basis, it’s “capable of being held in trust.”In July a Singaporean court determined that cryptocurrency is capable of being held in trust and on that basis, it should be recognized as property. Earlier this year, the High Court of Justice in London recognized non-fungible tokens (NFTs) as property.The report from the People’s Court reaffirms the legal status of virtual assets as protected property under Chinese law. This development highlights the ongoing divergence between China’s regulatory policy and the judicial interpretation of virtual assets, signaling a potential evolution in the country’s approach to cryptocurrencies.

Gulf Binance Secures Thai Digital Asset LicenseBinance, one of the world’s leading cryptocurrency exchanges, has secured a digital asset operator license in Thailand, paving the way for the launch of a new crypto exchange and broker. The license, granted by the Ministry of Finance of Thailand and overseen by the Southeast Asian country’s Securities and Exchange Commission (SEC), ensures that the upcoming platform will operate in compliance with regulatory requirements.Photo by Markus Winkler on UnsplashLicense awardThe license was awarded to Gulf Binance, a joint venture between Binance and Gulf Innova Co., Ltd., a subsidiary of Gulf Energy Development PCL. It marks a significant milestone in Binance’s expansion efforts. The partnership was initiated through a memorandum of understanding signed in January 2022, as both parties recognized the potential of establishing a digital asset exchange in Thailand.Richard Teng, the head of Asia, Europe, and MENA at Binance commented on the development: “By harnessing Binance’s expertise together with Gulf’s established local presence and network, Gulf Binance aims to showcase the full potential of blockchain technology to meet the needs of Thai users. Local users can expect access to a trusted and regulated service that prioritizes user security alongside compliance with local regulations.”Combined expertiseGulf Innova, as a prominent player in the Thai business landscape, brings extensive expertise and experience in the digital asset trading sector to the joint venture. The conglomerate, headed by billionaire Sarath Ratanavadi, operates in various industries, including energy production, telecommunications, and digital businesses.By combining Binance’s unparalleled growth and expertise in the digital asset space with Gulf’s established presence and knowledge in Thailand, the partnership aims to create a powerful synergy that drives innovation, fosters growth, and provides exceptional value to users in the digital asset ecosystem.Q4 launchThe new crypto exchange is expected to commence operations in the fourth quarter of 2023, although further details about the platform will be disclosed closer to the launch.Often criticized for its opaque structure, Binance is showing renewed commitment to transparency and regulatory compliance. As regulatory frameworks are put in place in varying jurisdictions, global crypto businesses are having to change corporate structures in order to meet these changing requirements. That’s evidenced by Binance’s Thai joint venture, its launch of a separate corporate entity in the form of Binance Japan and a similar move by crypto exchange BitMEX in Hong Kong.Thailand has emerged as a significant cryptocurrency hub in Southeast Asia, with its capital city, Bangkok, ranked 10th globally in The Crypto Readiness Index published by Recap, a cryptocurrency tax software company. Despite the ban on cryptocurrencies as a payment method, Thailand continues to flourish as a hub for trading and investment activities in the crypto space.That ban on cryptocurrency payments, implemented by the SEC in April 2022, aimed to safeguard the stability of the financial system and mitigate potential risks to the economy. The SEC identified price volatility, cyber theft, and personal data leakage as concerns associated with cryptocurrencies. However, the regulatory measures did not impede trading or investment activities, allowing the crypto industry to thrive.Chainalysis, a leading blockchain analysis company, ranked Thailand 8th in its Global Crypto Adoption Index for 2022, surpassing countries like Russia, China, Nigeria, Turkey, Argentina, and the UK. This recognition highlights Thailand’s progressive stance toward digital assets and its growing adoption within the country.