Gaming Industry Pioneers to Gather at Korea Blockchain Week 2023

China’s Crypto Crackdown Reveals Capital Control LoopholesChinese authorities have been stepping up their efforts to crack down on cryptocurrency-related crimes, and with that, uncovering how digital currencies are being used to bypass strict capital controls imposed by Beijing.China may be a few years into a crackdown against the use of cryptocurrencies but despite that, their use and particularly their use for illicit purposes continue. That’s according to a report on Wednesday by the South China Morning Post (SCMP).Photo by Christian Lue on UnsplashCombating capital outflowsThe rising trend of capital outflows has prompted Chinese authorities to take action. Two prominent cases illustrate the extent of these illegal activities and the value of assets seized.In Jingmen, a city in Hubei province, police disclosed details of an online gambling case involving digital currencies used to evade regulation. The case has implicated over 50,000 individuals and a turnover of billions of dollars. Although the specific virtual currency was not mentioned, authorities revealed that they had frozen multiple accounts with a combined value of $160 million.Meanwhile, in Shanxi province, police solved a money laundering case linked to 380 million yuan worth of USDT, the US dollar stablecoin issued by Tether. China’s State Administration of Foreign Exchange is responsible for monitoring cross-border capital flows. Accordingly, it has taken steps to curb these illicit activities. Late last month, it fined ten firms in order to maintain order in the forex market.Digital yuan developmentThese recent cryptocurrency cases have exposed loopholes in China’s capital control system. Crypto mining and trading have long been banned by Chinese regulators. As an alternative, China has been actively developing its own central bank digital currency (CBDC), known as the digital yuan or e-CNY. 2023 has seen a raft of measures taken by various regional administrators throughout China to bring about further e-CNY adoption.However, the ban on cryptocurrencies and the launch of the e-CNY have driven many miners and traders underground or to overseas locations such as Hong Kong, which ironically, is vying to become a cryptocurrency hub. The continued depreciation of the yuan against the US dollar has intensified capital outflow pressures.Chinese bonds sell-offInternationally, fund managers have been selling significant amounts of Chinese securities since 2021. That goes against the current regional trend which sees emerging Asian markets experiencing substantial inflows of funds during the same period, according to the Institute of International Finance.That market activity has been in response to Chinese policies and escalating US-China tensions. An Atlantic Council report highlights that international institutional investors have been net sellers of approximately 1 trillion yuan in Chinese bonds since early 2022.China’s efforts to control capital outflows and stabilize the yuan’s value face ongoing challenges, as cryptocurrency-related crimes persist. While the crackdown exposes weaknesses in the country’s capital control system, it also underscores the difficulty authorities will have globally in trying to control digital currency use.

South Korea’s financial authority is moving to strengthen its ability to intervene early in suspected cryptocurrency price manipulation cases by seeking explicit legal authority to freeze related accounts. According to News1, the Financial Services Commission (FSC) plans to include the measure in the upcoming second phase of the country’s cryptocurrency legislation. Under the proposal, when financial accounts are suspected of being used to manipulate crypto prices, the FSC would be able to coordinate with financial institutions and cryptocurrency exchanges to freeze the funds.Photo by Ethan Brooke on UnsplashClosing gaps in illicit fund recoveryThe initiative is intended to address a long-standing enforcement challenge. Authorities have often struggled to recover illicit gains because funds can be moved elsewhere while investigations and court proceedings—often lasting up to three years—are still ongoing. By allowing accounts to be frozen before a formal investigation is launched, the proposal aims to close a critical gap in illicit fund recovery. An official from the authority cited a recent precedent to illustrate the measure’s potential impact. In September, a government task force disrupted a stock price manipulation case involving roughly 100 billion won ($69 million), of which about 40 billion won was illicitly obtained. It marked the first time the government implemented an early account freeze, preventing additional funds from being transferred beyond its reach. The official added that the same approach could be applied to cryptocurrency price manipulation cases when suspicious transactions are detected through Korean crypto exchanges. However, the measure would not be effective against activity conducted via overseas platforms. The proposal comes as the government continues to refine the second phase of its crypto regulatory framework, which is expected to focus primarily on stablecoin regulations. While authorities had originally planned to submit the bill to the National Assembly by the end of last year, the timeline has been pushed to this year as financial and monetary regulators work through unresolved differences. One point of contention lies between the Bank of Korea and the Financial Services Commission. The central bank supports allowing only bank-majority consortia to issue stablecoins, while the FSC opposes setting a bank-ownership threshold, arguing for the inclusion of non-bank participants. Even as regulatory debates continue, traditional financial firms are pressing ahead with their own digital asset initiatives, seeking to position themselves within the evolving framework. Life insurer explores blockchain collaborationsKyobo Life Planet Life Insurance, a mobile-only subsidiary of Kyobo Life Insurance, has partnered with Singapore-headquartered crypto exchange Crypto.com. According to South Korean media outlet Financial News, under the agreement, eligible users will receive benefits on Crypto.com, while reward points earned through Kyobo Life Planet’s healthcare platform can be used within the exchange’s ecosystem. The collaboration reflects broader efforts by the parent company to expand into digital assets. Last month, Kyobo Life Insurance joined Circle’s public testnet, Arc, to assess the technical feasibility of stablecoin-related infrastructure. 

South Korea Advances Crypto Disclosures Bill for LawmakersThe floor leader of the ruling political party in the South Korean Assembly is urging faster implementation of a new bill that will require Korean politicians and senior government officials to make a declaration of any crypto-related holdings.The bill was already in the works but is now picking up speed, and likely to be brought into effect earlier than expected. That’s according to a local report published by Yonhap news agency. The bill is being finalized against the backdrop of a particularly poignant political controversy.Photo by rawkkim on UnsplashPolitical controversyLawmaker and former Democratic Party of Korea opposition party member Kim Nam-kuk is at the center of a political fuss, and with that, intense scrutiny relative to his interaction with crypto-assets. Kim reportedly held 800,000 WEMIX tokens in early 2022, with a value in the region of 6 billion Korean won (around $4.5 million).Existing legislation provides for a need for Korean politicians to disclose their investments and wealth. However, that provision has not caught up with the digital asset era. Virtual assets had been an exception which lawmakers are now rushing to remedy.Once news of Kim’s crypto holding emerged, it led to suspicion and accusations of insider trading. The politician had made a number of crypto trades during the time in which he was actively working on digital asset legislation. As the controversy gathered more attention, it led to the offices of two of the country’s leading crypto exchanges, Bithumb and Upbit, being raided. Records related to Kim’s crypto trading activity were seized.Bringing forward enforcement dateThe bill that will remedy circumstances like the one that has arisen as a result of Kim’s crypto trading activity is being put forward by Yun Jae-ok, the floor leader of the ruling party. It had originally been scheduled to be implemented in December, but Yun is looking to have the bill amended so that the enforcement date of the proposed legislation takes place in two months.“Given the current high level of public interest, especially regarding lawmakers, it’s not appropriate to enforce the law six months later after the promulgation,” Yun told Yonhap news agency. It’s understood that Yun has asked the leader of the Public Administration Committee to put forward the modified version of the law.The legislative process in South Korea requires initial drafting of the bill, followed by the proposed legislation being scrutinized by a number of relevant committees, inclusive of the Legislation and Judiciary Committee. An assembly debate follows, and beyond that, it’s expected that there will be a vote on the legislation, which has been scheduled for Friday.Should the bill be carried following the vote, the approved bill then proceeds to the President. So long as it is not vetoed, it is presented to the public and becomes law.On an international basis, financial interest disclosure requirements are common. Taking the US and the UK as examples, both jurisdictions require their politicians to disclose financial holdings. However, it would appear that South Korea is about to enact an advanced form of such legislation comparatively, as currently in both the US and UK, there is no specific provision requiring politicians to disclose crypto holdings.