BOK Staffers Assess Crypto Market Vulnerabilities and Their Implications

Civic Group Files Embezzlement Complaint Against Former Kakao Chairman Over KLAY TokensA South Korean civic group, known as Economic Democracy 21, filed on Wednesday a prosecution complaint against Kim Beom-soo, the former chairman of the internet giant Kakao, and several executives from Kakao’s affiliated companies. The allegations at hand pertain to embezzlement, specifically revolving around the virtual asset known as KLAY.Photo by Tingey Injury Law Firm on UnsplashKlaytn’s native tokenKLAY represents the native token of the Klaytn blockchain, which was developed by GroundX, a blockchain subsidiary of Kakao.Legal breach claimsThe complaint, formally submitted to the joint crypto-crime investigation division of the Seoul Southern District Prosecutors’ Office, asserts that Kakao executives have breached the Act on the Aggravated Punishment of Specific Economic Crimes and the Capital Markets Act.Clandestine pre-salesWithin the detailed complaint, Economic Democracy 21 alleges that following the issuance of KLAY, Kakao’s executives conducted private pre-sales of KLAY tokens before their official listing. These pre-sales activities reportedly raised between KRW 150 billion and 300 billion ($113 million and $226 million). The accusation is that these funds were not channeled into business endeavors, but rather diverted for personal use.The complaint also contends that Kim and other executives withdrew KLAY tokens from the company under the guise of investments, compensation, and service fees related to “overseas investment business” since 2022. The civic group further asserted that these corporate leaders employed a program to manipulate transaction records, presumably with the intent of preventing third parties from discovering the nature of these transactions.

It emerged on Wednesday that the Indian version of the Apple App Store has blocked access to eight crypto exchanges that were recently subject to a show cause notice from an Indian government agency, the Financial Intelligence Unit (FIU). The development occurred only two weeks after these global firms were flagged for allegedly operating "illegally" in the country. The FIU had cited non-compliance with India's anti-money laundering rules. In its statement on Dec. 28, the FIU urged India's IT Ministry to block the websites of all nine services in the country. The affected exchanges include Huobi, Gate.io, Bittrex, Binance, Kraken, Kucoin, MEXC Global and Bitfinex. Binance acknowledged the issue in a social media post, stating that it will continue to work with local regulators. Interestingly, Bitstamp, another exchange mentioned by the FIU, remained operational on the App Store in India. While these apps have been removed from the Apple App Store, they are still available on the Google Play Store in India and their websites remain accessible within the country. Users who had previously installed these apps on their devices can still access them. Photo by Naveed Ahmed on UnsplashTax avoidanceThe backdrop for this action involves a trend where many Indian traders had shifted to global cryptocurrency platforms rather than native digital asset exchanges. India initiated cryptocurrency taxation last year, imposing a 30% tax on gains and a 1% deduction on each crypto transaction.  While Indian-based exchanges like CoinSwitch, CoinDCX and WazirX maintain compliant know-your-customer verifications, global platforms have not followed suit. Notably, WazirX has experienced a drastic 97% drop in trading volume over two years as many traders migrated to global apps. It’s thought that as many as five million crypto users have shifted their trading activity to offshore exchanges. The tax has proven to be controversial and according to Dr. Vikash Gautam, the author of a report on the tax measure published last November, “it just isn’t enforceable . . . It is possible to be done with international cooperation, but we do understand it is a long process. Some of the other countries have some arrangements with international exchanges to track that." Leveling the playing fieldIt’s amid that competitive backdrop that native Indian exchanges lobbied the Indian government through the Bharat Web3 Association (BWA) to take action against unregulated offshore exchanges recently. CoinSwitch's co-founder and CEO, Ashish Singhal, urged offshore exchanges to comply with local regulations, suggesting registration with the FIU and adherence to India's Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) measures. Singhal, whose CoinSwitch platform is a founding member of the BWA industry advocacy group, highlighted that this would not only benefit offshore exchanges but also enhance consumer protection in India through increased regulatory oversight. Earlier warnings from Indian cryptocurrency exchanges foresaw users shifting to decentralized exchanges or non-compliant services due to the New Delhi government's taxation policy on crypto. In response, CoinDCX announced incentives for customers transferring their crypto assets from global exchanges to its India-based platform. Taking to social media on Wednesday, CoinDCX founder Sumit Gumpta stated:”This is a defining moment for [virtual digital assets] in India, and we're dedicated to facilitating a seamless and secure transition for investors navigating these changes.”   

Bitget Launches Blockchain4Youth ProjectSeychelles-headquartered crypto derivatives trading platform, Bitget, announced on Thursday the launch of a new corporate social responsibility (CSR) project. The initiative seizes upon an opportunity to execute on a public good while at the same time, benefiting the future prospects of the business itself alongside the overarching crypto space.Blockchain4Youth is a new initiative from the crypto business with the objective of “empowering and inspiring younger generations to use Web3 and crypto tools to create and engage in a decentralized space. ” With this goal, the trading platform believes that a blockchain future can be created.Photo by Jill Wellington on PexelYouth key to crypto adoptionWhile this is a CSR project, it’s easy to interpret it as a win/win. The future success of crypto lies with the younger demographic. They are the ones who are digitally native. They’re the ones that can more easily identify with truly digital money and digitally decentralized systems.Bitget seems to get this according to the statement it issued: “Bitget believes that a blockchain-based future is essential to building better products and tools to help people advance crypto adoption. The platform will be relying on the young generation to promote such ideas and will help them become proactive leaders.”This is telling as it demonstrates firstly that the Seychelles-based platform understands that the younger demographic represents its future customers. But it also clarifies that Bitget understands that future products need to be purpose built to meet the specific needs of that younger demographic.46% of millennials own cryptoIt appears that Bitget’s initiative is further motivated off the back of recent research it carried out. Released last month, that research study reveals that 46% of Millennial respondents said they owned cryptocurrencies, compared to 25% of Gen X-ers, 21% of Gen Z, and just 8% of Baby Boomers.The depth of the study extended to 255,000 survey responses received from respondents distributed across 26 countries, including places as diverse as the United States, Japan, China, Nigeria, Germany, Indonesia, and elsewhere. The study achieved responses per country of at least 10,000 respondents.The research also uncovered that “related statistics compiled on attitudes towards the regulation of digital assets indicate that each successive generation is more likely to factor in the attitudes of electoral candidates towards crypto regulation when casting their vote.”One of the study’s key findings is the following: “By 2030, all Gen Z members will be adults and the spread of blockchain technology by that time could lead to an increase in the percentage of cryptocurrency adopters across all generations. As such, the chances of the growth in acceptance of cryptocurrencies in the coming years are very high.”Broader industry involvementBitget intends to extend involvement in its Blockchain4Youth project beyond the company, with participation coming from other blockchain firms. The press release sets out that “the platform will also collaborate with other leading blockchain firms to incubate innovative projects by young entrepreneurs and host U30 (Under the age of 30) hackathons to identify the most promising ones.”The crypto derivatives platform is kicking things off later this month through a series of campus lectures in Thailand, Vietnam, and Taiwan covering the topic of Web3. As well as being open to collaborating with industry peers, the company also wants educators to take an active role in the initiative.