UAE Starts to Accept Crypto License Applications

How will Binance’s criminal case affect its presence in South Korea?Binance, the world’s largest cryptocurrency exchange, has reached a settlement with the U.S. government to pay a fine of more than $4.3 billion after the exchange was accused of anti-money laundering (AML) and sanctions violations. Co-founder and CEO Changpeng Zhao also pleaded guilty to violating the Bank Secrecy Act, which requires financial institutions to submit documentation to prevent them from becoming mediums for criminal funding. Binance will thus be withdrawing completely from the U.S.Photo by Vadim Artyukhin on UnsplashNews of this incident has sparked keen interest within the South Korean crypto industry regarding the impact it could have on Binance’s presence and influence in the country.Murky future for Binance as Zhao resignsBinance allegedly failed to report transactions involving criminal entities such as terrorist groups, ransomware perpetrators and money launderers without implementing a system to prevent such crimes. In particular, organizations like the Izz ad-Din al-Qassam Brigades — the armed wing of the Palestinian militant group Hamas — as well as the Palestinian Islamic Jihad and ISIS were found to have utilized Binance as a channel for their funds. Furthermore, the exchange also facilitated transactions with users in sanctioned territories such as Iran, North Korea and Syria.Zhao has subsequently decided to step down as Binance’s CEO, taking to his X (formerly Twitter) account to state that he believes it is the right move. However, he also emphasized that the U.S. government did not accuse Binance of misappropriating user assets or engaging in market manipulation.Despite this fiasco, some insights have painted Binance’s future in a positive light. JPMorgan, the largest bank in the U.S., stated that the uncertainty surrounding Binance itself would diminish. “For crypto investors, the prospect of settlement would see the elimination of a potential systemic risk emanating from a hypothetical Binance collapse,” the bank said, according to an article published by digital asset news outlet The Block.GOPAX reaffirms partnership with Binance despite concernsGOPAX, a Korean fiat-to-crypto exchange that was acquired by Binance in February, also maintained a rather unexpected positive outlook. The acquisition had been followed by a complicated string of events hindering Binance’s full-fledged expansion in Korea, including delayed approval from the country’s Financial Intelligence Unit (FIU) to become a virtual asset service provider (VASP) and multiple leadership changes as a result.Investors in GOFi — GOPAX’s decentralized finance (DeFi) service — subsequently responded by filing a lawsuit at the end of June, claiming that financial authorities unjustly delayed the approval. They argued that, by approving the request, the FIU would enable Binance to provide the capital that GOPAX had struggled to gather to pay principal and interest payments on GOFi in the wake of last year’s FTX collapse.However, these circumstances did not sway GOPAX’s decision to work with Binance. “We learned of the news about Binance’s fine through articles from foreign media platforms,” GOPAX said. “Regardless, we are still in a business and technical partnership with the exchange.”Prospects for Binance’s landing in KoreaIn contrast to GOPAX’s seemingly positive outlook, the Korean crypto community has voiced mixed opinions about the effect of this development, especially on Binance’s successful entry into the domestic market.If GOPAX’s VASP approval had been delayed due to concerns about Binance’s suitability as its largest shareholder — incited by the legal risks it posed in the U.S. — the possibility of the approval going through may be more plausible as some of these risks have since been alleviated, said Yoon Seung-sik, an analyst at Seoul-based research firm Tiger Research.However, Jang Hye-won, an analyst at crypto data research platform Xangle, pointed out that interpretations may differ depending on the reasons behind FIU’s hesitation in approving the GOPAX acquisition. “If the concerns revolved around legal risks, then the path for Binance’s entry into Korea may seem cleared since those risks have been resolved. But if the concerns are about Binance’s capital inflow into the country, then this incident (Binance’s criminal case) will have no effect,” she explained.On the other end of the spectrum, some experts believe that this incident may have negatively affected the GOPAX acquisition. Hwang Suk-jin, a professor at Dongguk University’s Graduate School of International Affairs & Information Security and a member of the ruling People Power Party’s committee for virtual assets, stated, “Since criminal punishment for Zhao and the U.S. Securities and Exchange Commission’s (SEC) lawsuit are still pending, it’s hard to conclude that legal risks have been completely resolved. Binance paying a fine for money laundering may actually reinforce the FIU’s concerns about legal risks, making the GOPAX acquisition decisively unfavorable.”These statements come after a public opinion survey conducted earlier in June by Cratos, a Korean blockchain-based polling app, revealed that a 64.6% majority of respondents favored approving the GOPAX acquisition.

Korea unveils detailed plan for retail CBDC transaction pilot with 100K participantsThe Bank of Korea (BOK), Financial Services Commission (FSC) and Financial Supervisory Service (FSS) jointly announced on Thursday (local time) their comprehensive plan to pilot a central bank digital currency (CBDC). This pilot program will concentrate on two key areas: retail transactions and technical experiments within simulated environments.For the retail transaction aspect, the test aims to give citizens direct experience in using the new digital currency, helping them understand its advantages. This practical approach will promote public familiarity with the CBDC.In terms of technical experiments, these will be conducted in partnership with various banks. The goal is to explore and develop methods for constructing a financial market infrastructure suitable for the future, leveraging the capabilities of the digital currency.Photo by Terrence Low on UnsplashRetail CBDC test to commence in Q4 2024The initiative to examine retail transactions using a CBDC is scheduled to begin in the fourth quarter of 2024. This test will focus on improving how vouchers work. Currently, the use of vouchers faces several challenges, such as high fees, complex and slow settlement procedures and the risk of fraudulent transactions. CBDC-based deposit tokens programmed with the digital voucher functionality could help solve these problems. The exploration of digital vouchers within the realm of CBDCs is not just a concern in Korea but also a topic of global interest.Banks that will participate in the CBDC retail transaction test are to be selected by the end of the third quarter of next year, following necessary procedures such as the financial regulatory sandbox policy. These selected banks will receive the green light to issue deposit tokens within this regulatory sandbox framework. They’ll be in charge of recruiting and managing test participants, which includes both individuals and merchants. Additionally, these banks will be responsible for developing digital wallets for users and handling payment transactions. On the other hand, any bank interested in joining technical experiments in simulated environments may apply to do so until mid-December this year.Citizens who want to take part in the retail transaction test for the CBDC can apply through the banks involved in the test. However, it’s important to note that since this CBDC utilization test is a limited trial, the number of participants will be limited to a maximum of 100,000.The retail transaction test for the CBDC will involve three stages: issuance, distribution and payment. Initially, banks will issue deposit tokens with digital voucher functions upon request. Users will then use these tokens to buy goods from merchants, with the transactions being settled accordingly. Before starting, the BOK, FSC and FSS will propose pilot tasks to the banks, following consultations with relevant agencies and the review of pertinent laws. Banks will also propose tasks related to the voucher function. During the test, these tokens will be used solely for digital voucher transactions, and peer-to-peer transfers won’t be allowed.Simulated environment experiments: three use casesFor technical experiments within simulated environments, the financial authorities have selected three use cases focused on examining the technical feasibility of new types of financial instruments.The first objective is to collaborate with Korea Exchange, the only securities exchange operator in the country, to connect the CBDC system with a carbon credit trading simulation platform. This platform will be based on an external distributed ledger. The key objective here is to assess if the “delivery versus payment” (DvP) mechanism between carbon credits and special payment tokens can function smoothly. DvP is a settlement method that ensures the transfer of securities occurs only after the corresponding payment is made.The second objective will see collaboration with the Korea Financial Telecommunications and Clearings Institute (KFTC). In this scenario, a hypothetical issuer will release tokenized assets to the public through a public offering. To manage this, deposit tokens that match the subscription amount by investors will be temporarily frozen, preventing them from being liquidated. After the final allocation of these tokenized assets is determined, the system, using smart contracts, will automatically transfer funds equivalent only to the allocated tokenized assets.The last objective revolves around advancing the concept of a unified ledger introduced by the Bank for International Settlements (BIS). In this endeavor, the BOK aims to issue digital demo securities within the CBDC system. Following this, an experiment will be conducted where financial institutions will have the opportunity to trade these digital securities using the institutional CBDC. This trading will be executed using the DvP method.

Nomura’s Laser Digital Expands Crypto Venture Capital Arm with New PartnerLaser Digital, the cryptocurrency subsidiary of Nomura, one of Japan’s leading financial services companies, is strengthening its venture capital business with the appointment of industry veteran Florent Jouanneau as a new partner.Despite a decline in funding levels across the industry, Laser Digital aims to expand its venture capital arm, according to a report published by The Block on Tuesday.With Jouanneau joining the team, Laser’s venture team now consists of seven members, according to Olivier Dang, the company’s General Partner and Head of Ventures. Laser Digital, launched in the fall of last year, currently employs about 65 people and offers asset management and trading services alongside its venture capital activities.Jouanneau’s previous experience includes positions at White Star Capital, a venture capital firm that invests in Web3 and DeFi startups. He also served as a structured credit and ABS trader at Bank of America, and held sales and trading roles at UBS and BPCE Group’s Natixis.Photo by Markus Winkler on UnsplashCrypto venture business expansionThe decision to expand the venture business comes at a time when VC investments in Web3 are declining. In the first quarter of this year, Web3 venture funding dropped by 80% compared to the same period last year, as reported by data from K33 Research. VC investment in Web3 totaled $2.8 billion in Q1 2023, a significant decrease from $13.5 billion in Q1 2022.Jouanneau acknowledged the market slowdown in 2022 and highlighted the current opportunity for investment. He stated: “We are seeing a lot of valuations being dragged down by effectively the lack of capital to be deployed.” This sentiment aligns with the perspective of many crypto venture capitalists who view the current bear market as a favorable time to invest, given the risk-reward dynamics and the potential for institutional participation.Crypto sector maturationDang expressed optimism about the maturation of the crypto industry, pointing to the increasing interest of traditional financial institutions, including BlackRock, in spot Bitcoin ETFs. Dang believes that as more institutions enter the space, the quality of deal flow and transactions in the venture capital sector will improve.He also emphasized the importance of robust institutional-grade infrastructure to support these institutions, noting that Laser’s association with Nomura has helped instill trust among investors.While Laser’s fund is currently backed exclusively by Nomura, Dang mentioned that they have started raising third-party capital. The fund has invested in early-stage startups focusing on areas such as DeFi, CeFi, Web3 tooling, and infrastructure. Among its portfolio companies are DeFi protocol Infinity Exchange and crypto trading firm CrossX.Dang disclosed that the team aims to make an additional ten investments throughout the rest of this year, prioritizing projects with institutional use cases. However, they remain cautious about ventures primarily focused on gaming and NFTs due to their limited expertise in those areas.As the industry continues to mature and attract institutional interest, it’s clear that Laser is attempting to position itself as a trusted player in the space, leveraging its expertise and partnerships to drive growth and generate value for its investors.