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Seoul Prosecutors to Establish Dedicated Division to Combat Crypto CrimesSeoul Southern District Prosecutors’ Office announced that by the end of this month, it will establish a specialized division dedicated to investigating cryptocurrency crimes, according to local news agency Yonhap. This move marks the introduction of the first-ever cryptocurrency-focused investigation organization within South Korea’s prosecution system.Photo by Markus Winkler on UnsplashInvestigation and legal analysisThe newly formed joint cryptocurrency investigation division will prioritize its efforts on combating various crypto-related crimes, including fraudulent activities. Furthermore, the division will examine legal documents to determine whether certain virtual assets constitute securities.This introduction of a specialized division by the public prosecution is expected to streamline and expedite ongoing investigations into cryptocurrency-related cases, demonstrating the authorities’ dedication to addressing the emerging challenges associated with illicit activities in the crypto sphere.Investor protection effortsSouth Korea has been ramping up its initiatives to safeguard crypto investors. Notably, last month, the National Assembly’s plenary session passed the Virtual Asset User Protection Bill, which is scheduled to take effect in July of next year. Further strengthening the protective framework, the Financial Services Commission (FSC) recently announced a plan to require companies to disclose their virtual asset holdings in the footnotes of financial statements.

Korea’s FSS to Collect Public Comments on Financial Statement Guidelines for Virtual Asset EntitiesThe South Korean Financial Supervisory Service (FSS) has revealed a set of exemplary financial statements aimed at clarifying the disclosure requirements of virtual asset-related entities. These guidelines have been designed to align with the Korean version of International Financial Reporting Standards (K-IFRS), which was established by the Korea Accounting Institute (KAI).It was reported earlier this month that the Financial Services Commission (FSC) brought forward these regulations to tackle accounting uncertainties within the blockchain industry.The main goal of these exemplary guidelines is to help entities provide financial statement readers with essential information regarding virtual assets. This includes details about the reserve amount held by virtual asset issuers and information about the virtual assets held by virtual asset service providers (VASPs).Photo by Kelly Sikkema on UnsplashPresentation sessionsTo ensure effective dissemination and understanding of these guidelines, the FSS, KAI, and the Korean Institute of Certified Public Accountants (KICPA) have planned presentation sessions. These sessions will take place from July 26 to August 11, which will involve visits to VASPs, listed companies, and accounting firms. Valuable feedback and suggestions from these stakeholders are anticipated, as the events encourage open two-way communication and welcome participation from anyone interested.Discussion meetingsTo further refine the ideas put forward during the presentation sessions, two separate discussion meetings with experts are scheduled for September and October. The recommendations gathered from the industry will undergo a careful review by experts and be thoughtfully incorporated into the guidelines.The FSS will finalize the guidelines in cooperation with the FSC, and the Securities and Futures Commission under the FSC will review them and give approval for their implementation. This is expected to take place between October and November.The FSC has stated that these exemplary guidelines are currently in their preliminary stage and open to potential changes during the public comment period. Additionally, companies have the flexibility to make necessary adjustments to these practice guidelines to suit their specific needs and requirements.Issuers, holders, exchangesThe exemplary practice guidelines are specifically targeted at three types of entities: virtual asset issuers, virtual asset holders, and virtual asset trading exchanges.For virtual asset issuers, providing essential information about their virtual assets is a key requirement. This information should encompass their business models, accounting policies, obligations (e.g. whitepapers), and the current status of their projects. Such details should be disclosed in the annotations of their financial statements. Furthermore, revenue generated from the sales of virtual assets must be recognized, and any changes to their obligations should be duly noted. Moreover, disclosure of the reserved amount of issued virtual assets and their intended usage plan is mandatory.Companies holding virtual assets must provide information regarding accounting policies, the total value of assets held, the reasons behind their holdings, and any gains or losses incurred. Additionally, holders are obligated to disclose risks associated with virtual assets and their potential impact.Virtual asset trading platforms, such as exchanges, are mandated to disclose not only their own virtual asset holdings but also those held on behalf of their customers. This disclosure should encompass detailed information about their accounting policies, the total value of assets under their custody, associated risks, and the involvement of third-party custodians. In particular, the platforms must indicate whether they treat customer assets under their custody as assets or liabilities and provide a clear rationale for such classification in the annotations of their financial statements.

Oman’s Regulator Invites Feedback on Virtual Asset FrameworkProgressing toward the establishment of its own virtual asset regulations, the Sultanate of Oman is embarking on a significant step by soliciting public feedback on its comprehensive framework.The framework, which governs digital assets, is being developed by the Capital Market Authority (CMA) of Oman. The move reflects the country’s commitment to creating a robust regulatory environment for the virtual asset sector.The CMA’s consultation paper, released last week, outlines the agency’s objectives in crafting this regulatory framework. It aims to provide a viable financing and investment avenue for issuers and investors while also addressing the inherent risks associated with the virtual asset class. Central to this initiative is the integration of business requirements and measures to prevent market abuse.Photo by Niklas Weiss on Unsplash26 key questionsAt the heart of this regulatory endeavor are 26 crucial questions presented to industry stakeholders. Their valuable input will help shape the framework’s core components. These include provisions related to regulatory standards and licensing prerequisites for virtual asset service providers (VASPs), corporate governance, risk management, and the issuance of virtual assets.The proposed framework, as disclosed in the consultation paper, encompasses a spectrum of digital assets. This spans utility tokens, security tokens, fiat-backed and asset-backed stablecoins, and other currencies adhering to the Financial Action Task Force’s (FATF) definition of virtual assets. However, a noteworthy proposal that has garnered attention is the potential prohibition of privacy coins issuance, a decision pending public feedback.Aiming to reinforce accountability and stability, the CMA may mandate that VASPs establish a local presence in Oman through legally recognized entities and physical offices. Additionally, minimum capital requirements could be imposed on these entities. The envisaged framework may also stipulate that virtual asset firms maintain a low percentage of assets in hot wallets, conduct audits of safeguarded assets, and provide evidence of reserves.Shaping regulation through feedbackWith the consultation phase set to conclude on August 17, the public’s valuable feedback will shape the direction of Oman’s virtual asset regulations. The most salient viewpoints may find their place on the CMA’s official website. Following this consultation period, the CMA will proceed to finalize the regulatory framework.Although the public announcement regarding the launch of a regulatory framework was made on February 14, Oman’s journey toward regulating the virtual asset industry began well before. In November 2020, the National Committee for Combating Money Laundering and Terrorist Financing initiated discussions on forming a task force.Comprising officials from the CMA and the Central Bank of Oman, the task force explored whether to permit or prohibit virtual asset activities. Subsequently, in December 2022, consultants were engaged to facilitate the establishment of this new regulatory landscape.The United Arab Emirates, and in particular, the individual emirates of Dubai and Abu Dhabi, have led the way in the Middle East in progressing a workable framework for the digital asset industry. Oman’s proactive approach is following the example set by its regional peer.Shaping its virtual asset framework underlines its desire to foster innovation while ensuring the integrity of its financial landscape. Its latest effort in seeking public feedback is a positive development that should assist it in arriving at a progressive framework.