From real-name account trading to investigating individuals using cryptocurrencies to evade taxes, government officials in South Korea are enacting stricter regulations to oversee the cryptocurrency industry in the country. These measures often require digital currency businesses to provide detailed customer data and transaction information to the relevant authorities.
With these stringent measures often comes an increase in the cost of compliance for exchanges and other crypto service providers. Privacy concerns are another issue amid the swath of information being provided to government agencies.
However, this strict regulatory climate has done little to dampen the enthusiasm for cryptocurrencies in South Korea. Crypto trading in the country continues to gain more traction, with exchange investors in line for significant price gains in shares amid the current upsurge in digital currency activity in the country.
Data from South Korea’s National Tax Service, or NTS, shows an increase in the number of crypto investors in the country over the past year. This surge in market participants has also triggered an eightfold increase in trading volume such that the crypto arena recently overtook the stock market, albeit temporarily, in daily trading volume.
South Korea’s tightened crypto regulations are also coming amid updates to the Financial Action Task Force’s, of FATF’s, guidelines on cryptocurrency regulations. The intergovernmental body continues to call for heightened restrictions on the crypto space, predicated on exerting strict oversight of centralized entities like exchanges and custodial services.
Specific Financial Transactions Act
On March 25, updated cryptocurrency regulations under the Act on Reporting and Using Specified Financial Transaction Information, commonly referred to as the Specific Financial Transactions Act, will come into effect in South Korea. These new laws herald significant policy changes for virtual asset service providers, or VASPs, in the country.
For one, all VASPs — exchanges, custodians, asset managers and wallet service providers — must be licensed to operate in the country. Exchanges must also maintain relationships with local banks to ensure mandatory real-name account trading.
For South Korean officials, the insistence on real-name crypto trading accounts is part of efforts to combat money laundering via cryptocurrencies. This rule requires exchanges to obtain and renew certain license approvals from lenders in the country.
By partnering with local banks and requiring real-name trading accounts, South Korean regulatory and law enforcement agencies can have access to crypto transaction data for their various investigative purposes. Crypto businesses in the country must abide by strict financial reporting standards following the new laws coming into effect later in March.
The Korea Financial Intelligence Unit, or FIU — an arm of South Korea’s Financial Services Commission responsible for Anti-Money Laundering oversight across the country’s financial sector — will police the activities of cryptocurrency businesses. These VASPs now have until Sept. 24 to come into full compliance with the new reporting standards.
Exchanges, wallet providers, asset managers and other crypto firms under the VASP classification must flag suspicious transactions and report them to the FIU for subsequent money laundering investigations. Also, new VASPs looking to operate in the country must register with the FIU before servicing customers in South Korea.
Meanwhile, South Korea’s NTS is also focusing its attention on the crypto space in efforts to combat tax evasion. However, with crypto taxation laws yet to come into effect, the NTS is looking at individuals attempting to evade state taxes by hiding their wealth in digital assets.
The NTS recently identified more than 2,400 individuals who hid over $32 million in assets from the government. As part of the investigation, the tax agency requisitioned customer data from major crypto exchanges in the country and is even reportedly planning to conduct a deeper probe into some of the participants in the tax evasion scheme.
The cost of compliance
Binance Korea shut down its operations back in December 2020, less than a year after its initial launch. At the time, the platform identified low liquidity and declining transaction volumes as the reason for its decision to shut up shop.
However, there was some speculation that incoming regulations prohibiting order book sharing among cryptocurrency exchanges was the reason for Binance’s decision to shutter the platform. Now, with the new regulatory standard only days away, OKEx has also shut down its platform in the country.
Of the over 100 cryptocurrency exchanges in the country, only the “big four” — Bithumb, Upbit, Korbit and Coinone — hold partnerships with local lenders to enable real-name account trading. These platforms that account for the bulk of the crypto trading volume in South Korea are likely the only ones capable of bearing the cost of compliance associated with acquiring the necessary licensing approvals from commercial banks.
For one, to obtain banking partnerships in the nation, exchanges must develop robust information security management protocols. Also, their principal executives must have clean criminal records.
Additionally, exchanges must provide proof of adequate deposit insurance to cover losses from any hacks. Indeed, South Korean exchanges have been victims of numerous cyberattacks purportedly from North Korean hackers sponsored by authorities in Pyongyang.
Earlier in March, Bithumb announced plans to upscale its AML protocols. As part of these efforts, the South Korean crypto exchange giant has begun utilizing AML tools and solutions developed by blockchain intelligence firm Chainalysis.
For smaller exchanges in South Korea, the cost of compliance brought on by these measures might prove significantly burdensome, leading to a raft of exits from the country. Such a situation could lead to a monopolized cryptocurrency trading market in the country, with only a few participants left in the arena.
When in-house solutions are inadequate to ensure compliance with these regulations, exchanges often turn to third-party services. According to Alice Nawfal, co-founder of Travel Rule-compliance platform Notabene, her company is working with several crypto businesses in South Korea. In a conversation with Cointelegraph, Nawfal revealed:
“South Korean exchanges have a 6-month grace period starting March 2021 to implement the Travel Rule. None of them to our knowledge are live yet but are actively exploring how to comply with this. Notabene is currently in talks with several Korean VASPs on how we can help them comply with the new rules.”
Counterparty information-sharing often comes with privacy concerns, and the crypto regulations soon to be in effect in South Korea are likely no different. Indeed, similar issues have been raised with the FATF’s Travel Rule, which requires VASPs to share customer data across multiple jurisdictions.
For the FATF, the guidelines are all about bringing the crypto space to a similar regulatory standard as players in the legacy finance arena. In a statement to Cointelegraph, a spokesperson for the FATF argued:
“The FATF puts the same obligations on virtual assets and their service providers as any other financial business. The FATF is not singling out any form of crypto or cryptocurrency, the FATF is bringing them up to the same standard as banks, money service businesses, securities dealers, and others in the financial sector.”
Despite several reports showing that illicit transactions constitute a minute portion of global cryptocurrency commerce, the FATF still maintained that digital currencies can be misused for illegal activities, adding:
“Money laundering fuels serious crime and terrorism. The threat of criminal and terrorist misuse of virtual assets is serious and urgent. The FATF expects all countries to take prompt action to implement the FATF Recommendations in the context of virtual asset activities and service providers.”
Back in April 2020, the FATF assessed South Korea’s efforts in combating money laundering and terrorist financing. At the time, the intergovernmental body praised the country’s “sound legal framework” while calling for more work to be done in the anti-graft arena, especially concerning corruption among government officials.
Binance proposes a real-time token burning mechanism to boost BNB value
- Binance has proposed the BEP-95 aimed to burn a percentage of transaction fees as a deflationary measure.
- BEP-95 will occur alongside the quarterly token burn and well after the 100 million token supply is achieved.
Binance Smart Chain (BSC) is taking further steps to incorporate an additional deflationary mechanism to increase token valuation. As announced today, Binance (BNB) is introducing a new Binance Evolution Protocol (BEP) known as BEP-95. The BEP stands out from the network’s occasional token burns since it introduced a real-time burning mechanism.
According to Binance, a fixed portion of gas fees collected by validators in each block will be sent to the burn address. The ratio initially set at 10 percent, is adjustable according to changes proposed by the Binance community. BSC validators get to vote on community proposals, where voting power is based on staked BNB.
For a proposal to be reviewed by the validators, it has to receive a minimum deposit of 2,000 BNB (mainnet). All BNB is returned to holders after the finalization of the voting process. A proposal that wins is that which gathers 50 percent of the total voting power on the mainnet. Binance notes that voted-upon parameters are implemented immediately.
Details of Binance BEP-95 token burning mechanism
BEP-95 became relevant as it speeds up the BNB token burn, and makes the network increasingly decentralized. The BNB supply cap is about 168 million tokens and Binance intends to burn until 100 million tokens remain in circulation. This will take about 5-8 years to complete, according to Binance. The network’s most recent quarterly burn wiped out over 1 million tokens, worth about $639 million, from circulation.
However, the latest update from its blog now says the BEP-95 burn “will continue functioning” even after the above target is attained. With the burn, Binance expects the intrinsic value of the BNB token to increase in tandem with demand. The network notes that validators and delegators may receive fewer tokens from staking, but the “fiat-denominated value of their rewards may increase.” Moreover, BNB has multiple use cases that benefit all holders of the token.
Currently, BEP-95 is in the draft stage and the network is yet to give a specific date for its implementation.
Several blockchains use the crypto-burning mechanism to create token scarcity and a subsequent increase in token value. Ethereum, for instance, uses the EIP-1559 for this purpose.
BNB price action
BNB, the fourth-largest cryptocurrency by market cap, was trading at $494 at press time, according to our data. The token has gained 0.8 percent in the day, and 4.8 percent week-over-week. Similar to other digital assets, BNB has rallied fueled by the Bitcoin-led gains. Crypto investor and YouTuber Lark Davis expects “good things” for the BNB price following its launch of a $1B growth fund.
Google warns crypto investors of Youtube scams amidst high hacking
- Google warn crypto investors to be weary of Youtbe scams.
- Google says hackers impersonate crypto influencers to run scams on YouTube.
- YouTube, a hotbed for crypto scams.
Google’s Threat Analysis Group has warned crypto investors to beware of cryptocurrency scams on Youtube as phishing and impersonation on the video-sharing platform surges.
The Google group noted that a group of hackers is taking over Youtube, rebranding popular Youtube channels of well-known crypto or tech companies. “The channel name, profile picture, and content are all replaced with cryptocurrency branding to impersonate large tech or cryptocurrency exchange firms,” the group said, adding that hackers would live stream videos promising crypto giveaways in exchange for “initial contributions.”
According to the Google group, if these hackers don’t rebrand, they sell pages to the highest bidder depending on how many subscribers the channel has. They note that fake Youtube pages sell anywhere from $3 to $4,000.
The Google group notes that a group of hackers recruited in a Russian-speaking forum are actors behind the campaign.
Crypto investors should be warned as YouTube remains a hotbed for crypto scams
The video-sharing platform so many times has been used as a tool to dupe unsuspecting crypto investors. In December, American crypto exchange Gemini exposed two fake YouTube channels that were pretending to be from the exchange.
“These scam accounts are not our company. We have reported these accounts to YouTube,” Gemini tweeted.
Funny enough, it was not the first time Gemini was being impersonated on Youtube.
Crypto scams have been well perpetrated on the platform that the video giants ban crypto content on its platform. Authorities in the UK also warned young crypto investors with campaigns on Youtube and TikTok against being victims of crypto scams.
The cycle of crypto scams across all platforms is one that may never end. As much as crypto exists, crypto scams would remain a thing. The rise in crypto scams recently has been attributed to the surge in price and adoption of cryptos globally. It is safe to say that with crypto prices going up and more people, corporate organizations adopting cryptos, more scammers will be threatening the burgeoning space.
Binance’s Trading Volume Hits $100 Billion in Just One Day
Binance continues to see unprecedent trading activity while attempting to sail through regulatory hurdles
Binance’s daily volume hit an eye-popping $100 billion on Oct. 20, according to a tweet by CEO Changpeng Zhao.
The leading crypto exchange recorded this crucial milestone on the day Bitcoin, the largest cryptocurrency, reached a new all-time high of $67,276.
Despite introducing stricter measures for users due to severe regulatory scrutiny, Binance enjoys a comfortable lead over other crypto exchanges in both spot and derivatives trading, according to data provided by CoinMarketCap.
Eerier this month, the trading platform also announced a $1 billion ecosystem fund.
Meanwhile, the decentralized finance sector is catching up with centralized behemoths. The total value locked in DeFi protocols has hit $100 billion for the first time.