Hong Kong's spot Bitcoin ETFs experience first daily outflows 

KCC sets guidelines for user protection on metaverse platformsThe Korea Communications Commission (KCC) has established its latest guidelines for ensuring the protection and safety of users of metaverse platforms, dubbed the “Basic Principles for the Protection of Metaverse Users”.Photo by GuerrillaBuzz on UnsplashNavigating the metaverse landscapeAlthough metaverse platforms can create new economic and business opportunities by linking reality with the virtual realm and providing users with a realistic and immersive experience, the agency argued that various problems may arise due to the use of anonymous profiles or avatars.In response, the KCC assembled six voluntary principles for metaverse service providers to apply to their operations through discussions with a policy advisory group for metaverse ecosystem user protection. The group is composed of 29 members, including academics, legal experts and domestic and overseas companies. It has been active since last year.Fostering ethical metaverse environmentsThe principles cover topics like ensuring free yet respectful communication between users; granting users a platform for voicing their opinions on issues related to their rights and interests; and ensuring that transactions involving digital products and services are conducted on proper terms. They also urge companies to give users the right to use and manage their own data along with that of the metaverse.On a less technical level, the last principle mentions that companies should make efforts to study the long-term impact of the metaverse on users’ physical and mental health, and on society, culture, environment and economy.The agency has also proposed to draft a code of practice outlining more specific measures to protect users, such as prohibiting sexual harassment and stalking, reporting and punishing cyberbullying and transferring the right to purchase NFTs.Responsible governanceMajor metaverse platform operators like Naver, SKT and Meta, who are members of the agency, agreed to apply the guidelines and include them in their relevant terms and conditions documents and service operation regulations. The KCC stated that it plans to monitor whether or not these commitments are met.Although not mandatory, the guidelines are recommended as measures to resolve user inconvenience, enhance service reliability and provide standards for user protection. User protection includes that of children, adolescents and personal privacy.

Korean Survey: High Hopes for New Tech, Less for Blockchain and MetaverseA survey report on the perceptions and acceptance of evolving technology among the South Korean public was released yesterday by the Korea Communications Commission (KCC) in collaboration with the Korea Information Society Development Institute (KISDI). The survey, conducted from October 5, 2022, to January 13, 2023, involved 5,378 smartphone users who accessed the Internet at least once a day.Photo by Алекс Арцибашев on UnsplashTech toolsThe report titled “The 2022 User Panel Survey on Intelligent Information Society” revealed that Korean individuals generally hold high expectations for technological tools. Among the respondents, 89.3% expressed their belief that robots would enhance our lives, making it the most anticipated technology. This was closely followed by autonomous driving (87.8%) and kiosks (87.6%). On the other hand, blockchain and AR/VR were slightly less popular, with 73.4% and 72.4% of respondents showing interest, respectively. AR/VR stands for augmented reality and virtual reality.Information servicesThere was also significant anticipation for advanced information services among the respondents. Algorithm-based content recommendations garnered approval from 86.9% of participants, while artificial intelligence-based healthcare received support from 86.5%. However, metaverse-related services received a more moderate level of enthusiasm, with approximately 66% of respondents expressing interest.Metaverse usageThe survey also delved into the usage of metaverse platforms among respondents, revealing that only 12.7% had prior experience with such platforms. This finding suggests that the level of metaverse usage remains relatively low. Among the metaverse-experienced respondents, the most popular platform was ZEPETO, which accounted for 39.4% of usage. On average, users spent 1 hour and 4 minutes on the platform daily. ZEPETO is a Korean communication service that allows users to create and interact as 3D avatars in a virtual world. The cyberspace platform is operated by NAVER Z, an affiliate of the nation’s search engine giant NAVER Corp.Regarding the activities conducted on metaverse platforms, 77.9% of users stated that they primarily utilized them for gaming purposes. This was followed by “communicating with friends” (67.8%) and “communicating with strangers” (66.6%).When discussing the advantages of the metaverse, respondents highlighted its ability to transcend physical and temporal limitations, with 65.7% and 62.6% mentioning “less constraint by time” and “less constraint by space,” respectively. Additionally, 60.1% of respondents mentioned the metaverse’s capacity for self-expression as a benefit. However, respondents also expressed concerns about the metaverse, including risks such as sex offenses (65.7%), personal data infringement (62.6%), hacking (60.1%), and addiction (57.8%).

Japan's Financial Services Agency (FSA) is proposing new legislation in an effort to prevent the assets of Japanese investors held on crypto exchanges from being transferred overseas. According to local news outlet Jiji Press, the Japanese regulator recently put forward the idea of drafting such a bill. It’s thought that the move suggests that the Japanese regulators have learned from the collapses of cryptocurrency exchanges Mt. Gox and FTX. Photo by Jaison Lin on UnsplashLearning from past failuresWhile Japan already had a higher standard of regulation in place prior to the FTX collapse, likely as a consequence of the authorities having experienced the downfall of Mt. Gox in February 2014, there is still room for improvement.  While funds had been ring-fenced for FTX Japan users, those who accessed services advertised in Japan through the FTX app were deemed to have been accessing a service which fell under an international jurisdiction, denying them the same protections otherwise offered to FTX Japan platform users as a consequence of the regulations that had been put in place. Incorporating a holding orderJapanese media outlet Nikkei described this latest move by the Japanese FSA as follows: “The Financial Services Agency is moving towards creating a new ‘holding order’ in the Payment Services Act, which regulates cryptocurrency exchanges, that will order them not to take domestic assets entrusted to them by customers overseas.” Consequently, the regulator is looking to add this as the latest proposed amendment to the Payment Services Act. Back in September it emerged that amendments to that existing legislation were being looked at with a view towards making it easier for businesses to incorporate digital assets into their service offerings. The regulator has also been mulling over the reclassification of crypto as a financial instrument by amending the Payment Services Act accordingly. Additionally, a more generous tax policy is being proposed. Currently, the Japanese authorities impose a tax rate of up to 55% on cryptocurrency-related revenues. Corporate holders of digital assets have to apply a 30% tax rate, irrespective of income or profits. With that, a 20% tax rate is being considered. The matter became a political issue prior to the East Asian nation’s recent elections, with the leader of the Democratic Party for the People (DPP) backing the application of a 20% crypto tax rate. The application of a holding order has applied previously to companies that have been registered under the Financial Instruments and Exchange Act. This proposed amendment would see it applied to virtual asset trading platforms as part of the Payment Services Act. Guarding against bankruptcy lossesIf applied, the amendment would prevent loss of Japanese investor funds in circumstances where a crypto exchange platform goes into bankruptcy. Legal precedent set in the FTX bankruptcy in the United States means that if a user’s funds go into a non-individually segregated hot wallet belonging to an exchange, any property rights, even if explicitly outlined in the terms of service, are lost.  A company can make a case to go into bankruptcy in any international jurisdiction, which means that this precedent has potential implications for all market participants. The proposed amendment from the Japanese FSA would serve to protect investors from such an eventuality.