KISA to establish blockchain trust framework for public services

Korea considers legal recognition of virtual assets as trust assets for investor protectionSouth Korea’s Ministry of Justice (MOJ) is assessing whether customers’ virtual assets on cryptocurrency exchanges should be legally recognized as trust assets. This classification would give users priority in claiming their virtual assets in case of an exchange’s bankruptcy, thus strengthening investor protection. There’s a noted concern about potential disputes in such bankruptcy situations, as users’ digital assets are typically considered to be in the custody or storage of these platforms.Photo by Daniel Bernard on UnsplashLegal study by Seoul National UniversityAccording to a Tuesday report by local news outlet ChosunBiz, citing industry and legal sources, the MOJ has initiated a legal study on this subject. The research is being conducted by the Seoul National University R&DB Foundation, which started the project earlier this month.Through this study, the MOJ is expected to examine the legal classification of cryptocurrency as property. This review is significant because, for cryptocurrencies to be held in a trust, they must be legally recognized as property. Meanwhile, the upcoming Virtual Asset User Protection Act, set to come into effect next July, mandates that only cash deposits made by users be segregated from the assets of the exchange itself.In Korea, under the current provisions of the Capital Markets Act, virtual assets are not recognized as being held in a trust. Instead, staked cryptocurrencies are seen as being under custodial management or storage. In such arrangements, only a debtor-creditor relationship concerning virtual assets is acknowledged, differing from the legal framework of a trust.Prioritization of rightsIf a cryptocurrency exchange becomes insolvent and enters liquidation, the current legal framework could end up prioritizing the rights of the exchange’s creditors or shareholders over those of the crypto investors. This situation has faced criticism for its inadequate protection of investors. However, if the crypto assets were considered to be held in trusts, it would enable users to acquire “rights to foreclose outside bankruptcy.” This means users would have the right to receive priority reimbursement for their crypto assets, offering them a higher level of protection in the event of an exchange’s bankruptcy.Regarding this development, an official from the MOJ said that while the study is a fundamental legal review focused on exploring ways to protect users through the application of trusts for various cryptocurrency transactions, including those involving decentralized finance (DeFi), it is too early to provide specific details at this stage.

SK Planet and Milk Partners to Propel Blockchain Ecosystem DevelopmentSouth Korean tech company SK Planet announced today a partnership with Milk Partners, the operator of MiL.k, a blockchain-based reward points platform, in order to foster the UPTN blockchain ecosystem. That’s according to a report by local news outlet Edaily. This alliance comes after conglomerate SK Group’s affiliate recently launched its new non-fungible token (NFT) membership program called “Road to Rich.”Photo by Karolina Grabowska on PexelsSK Planet’s NFT initiativeRoad to Rich is an initiative within OK Cashbag, SK Planet’s popular reward points system. In an effort to promote this initiative, the two companies will organize a Road to Rich event on the MiL.k app this month and enable users to exchange between OK Cashbag points and MiL.k points later this year.Milk Partners’ tech contributionMilk Partners’ parent company, Keyinside, has contributed to the development of SK Planet’s blockchain platform UPTN and has been involved in OK Cashbag’s NFT project, providing business consulting and technology development. UPTN, built on the Avalanche network’s subnet, made its debut through OK Cashbag’s NFT initiative, and a dedicated wallet based on UPTN was recently launched.Kim Kyo-soo, the head of the customer experience division at SK Planet, said that the company plans to build the UPTN ecosystem where customers can enjoy various services, including membership benefits, concert tickets, and shopping.Milk Partners CEO Cho Jung-min expressed enthusiasm about the synergies that can be achieved by participating as a major partner in the blockchain project spearheaded by Korea’s major corporate. He added that the two sides will work together to offer valuable and beneficial services to users.

South Korea is ramping up its scrutiny on cryptocurrency exchanges, with the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) announcing its intention yesterday to remove platforms that lack the necessary qualifications, according to the Korea Economic Daily.Unqualified exchangesIn its announcement yesterday, the FIU revealed its aim to block unqualified virtual asset service providers (VASPs) from facilitating trades in Korean won, the currency of the country. Those currently providing Korean won trading services will be eliminated from the market unless they can demonstrate they meet the required standards. With many exchanges set to renew their registrations in the latter half of this year, the FIU is gearing up for thorough evaluations through June to identify and remove unqualified VASPs. The FIU's assessments will focus on determining whether VASPs have adequate measures in place for user protection and are safeguarded against risks of money laundering. To bolster its efforts in preventing money laundering risks, the FIU intends to establish a framework where lawyers and accountants participate in crypto oversight activities.Photo by Andrea Piacquadio on PexelsExamining majority shareholder of VASPThe financial watchdog is also looking to propose amendments to the Financial Transaction Reports Act, aiming to raise the standards for VASP registration by introducing more stringent requirements. Beyond the current assessments of a VASP operator and its executives, the new regulations will involve close examination of its majority shareholder. This additional layer of scrutiny will evaluate the credibility of the major parties related to the VASP, taking into account factors such as their history of loan defaults. The FIU is set to create a system for analyzing cryptocurrency transactions and will strengthen its communication channels, not just with financial institutions but also with prosecutors and police forces. Furthermore, the agency is reviewing the Financial Action Task Force's (FATF) recommendation for freezing transactions in cases of suspicious activities. Once implemented, this will enable the FIU to temporarily halt suspicious transactions before bringing the issue to prosecutors.