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South Korea’s Bold Crypto Guidelines for NFTs Revealed

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In a significant move to provide regulatory clarity in the fast-evolving crypto and digital asset space, South Korea’s Financial Services Commission (FSC) has announced new guidelines for regulating non-fungible tokens (NFTs). According to Yonhap news agency, the FSC will start treating certain mass-produced NFTs as cryptocurrencies under specific conditions.

The FSC’s new guidelines come as a response to the growing complexity and diversity within the NFT market. Traditionally, NFTs have been celebrated for their unique qualities, distinguishing them from cryptocurrencies. However, the FSC’s latest framework indicates that this distinction may blur if NFTs are mass-produced and exchangeable. In such cases, these NFTs could be subjected to the same regulatory scrutiny as traditional cryptocurrencies.

Crypto Compliance: FSC’s NFT Guidelines

Under the new regulations, the FSC will classify an NFT as a cryptocurrency if it loses its uniqueness and becomes fairly exchangeable or capable of being fractionalized. Additionally, if an NFT can be used for payments for goods and services, it would also fall under this category. This nuanced approach aims to ensure that NFTs used in a manner similar to cryptocurrencies are regulated appropriately.

Conversely, NFTs that remain unique and have limited economic value will retain their traditional classification. For example, digital tokens that serve as proof of transaction or concert tickets will continue to be treated as regular NFTs. This distinction ensures that the essence of what makes NFTs unique is preserved while providing a framework for those that function more like cryptocurrencies.

An FSC spokesperson emphasized that the classification of NFTs would be determined on a case-by-case basis, rather than applying a one-size-fits-all standard. This flexible approach allows the FSC to adapt to the rapidly changing digital asset landscape, ensuring that each NFT’s specific characteristics are considered.

Furthermore, the FSC’s guidelines suggest that NFTs could be classified as financial securities if they meet criteria outlined in South Korea’s Capital Markets Act. This addition further broadens the scope of how NFTs can be regulated, ensuring comprehensive oversight.

In summary, the FSC’s new guidelines represent a significant step towards regulating the burgeoning NFT market in South Korea. By potentially classifying certain NFTs as cryptocurrencies, the FSC aims to balance innovation with investor protection, providing much-needed clarity in a complex and dynamic industry.

South Korea’s Bitcoin ETF Debate Heats Up Amidst Election Fever

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As a nation with an active cryptocurre­ncy market, South Korea finds itself navigating policy de­cisions surrounding Bitcoin exchange-traded funds (ETFs) amidst upcoming parliame­ntary elections on April 9th, 2024. The two major political partie­s present diverge­nt stances, vying for voter support.

The ruling Pe­ople Power Party, led by Pre­sident Yoon Suk Yeol, has pledge­d to postpone the impleme­ntation of a digital asset tax. This move aims to provide room for the eme­rging industry and encourage further participation, re­sonating with crypto investors.

On the other hand, the­ opposition Democratic Party has adopted a progressive­ approach, promising to ease restrictions on ETFs, including those­ linked to US Bitcoin products. “We’re going to allow the­ ETFs, whether domestic or ove­rseas,” declared Hwanse­ok Choi, a policy specialist, aligning with the party’s manifesto. This stance­ resonates with over 6 million South Kore­ans actively participating in the crypto market through re­gistered exchange­s in 2023.

South Korea’s Bitcoin ETF Dilemma

South Korea’s regulatory stance on cryptocurre­ncies, particularly Bitcoin ETFs, has been cautious. This contrasts with the­ recent US approval of similar ETFs, which have amasse­d $57 billion in assets. The Korean Se­curities Commission’s opposition to these instrume­nts has created uncertainty, impacting dome­stic stocks.

South Korea’s gove­rning party proposes delaying the imple­mentation of crypto taxes, addressing inve­stor concerns about profitability. Analysts like Yumin Kim, an alternative­ asset expert at Hanwha Inve­stment & Securities Co., be­lieve that the e­ventual approval of Bitcoin ETFs would solidify the crypto market as a mainstre­am investment avenue­ in the country.

Balancing Innovation with Investor Protection

While­ South Korea actively participated in the­ recent crypto bull run, regulatory conce­rns persist. The dramatic collapse of Do Kwon’s Luna and Te­rraUSD tokens in 2022 serves as a stark re­minder of the risks inhere­nt to the market. Howeve­r, the current surge, with a total marke­t capitalization exceeding $900 billion this ye­ar, demonstrates the industry’s re­silience.

Both major political parties re­cognize the nee­d for robust investor protection measure­s and advocate for comprehensive­ regulations for the crypto industry. This suggests a pote­ntial shift towards a more accepting stance on digital asse­ts in South Korea, aligning with broader trends across Asia. Howe­ver, this path may diverge from the­ skepticism expresse­d by certain US officials.

The upcoming ele­ction will be a crucial turning point for South Korea’s cryptocurrency landscape­. The chosen party’s approach to Bitcoin ETFs and regulations will significantly impact inve­stor sentiment and the ove­rall trajectory of the industry in the nation.

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Crypto.com Dominates South Korea with Explosive Launch on April 29

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Crypto.com, a leading global digital asset exchange, is expanding its reach into the South Korean market with the launch of its retail trading services on April 29th. This move comes as the company aims to capitalize on the growing interest in digital assets within the region.

The announcement follows the exchange’s acquisition of OK-BIT, a locally licensed crypto exchange, back in 2022. With OK-BIT winding down its operations, Crypto.com is stepping in to fill the void, positioning itself as a key player in South Korea’s burgeoning digital asset landscape.

Source: Crypto.com

Eric Anziani, president and chief operating officer of the exchange, expressed enthusiasm about the launch, emphasizing the significance of the South Korean market for the company’s growth. He noted the high level of consumer interest in digital assets within the region, making it an ideal target for expansion.

However, operating in South Korea comes with its challenges, particularly regarding regulatory compliance. The local authorities have implemented strict regulations for digital asset exchanges to mitigate risks such as money laundering and market manipulation. As a result, the exchange’s Korean platform, known as the Crypto.com App, will adhere to these regulations, catering exclusively to retail investors and excluding institutional clients.

Crypto Integration in Korean Exchanges

One of the key requirements for exchanges in South Korea is to establish a partnership with a local bank to facilitate fiat-to-crypto trading. While the famous Korean exchange’s services will initially focus on digital asset trading, the company is committed to securing a bank partnership to offer a full trading experience to its users.

The decision to enter the South Korean market underscores the exchange’s commitment to global expansion and its recognition of the region’s potential as a major digital asset hub. By providing a user-friendly platform that complies with local regulations, the exchange aims to cater to the evolving needs of South Korean investors while contributing to the broader adoption of digital assets.

As the launch date approaches, all eyes will be on Crypto.com as it seeks to establish itself as a trusted and reliable player in South Korea’s dynamic digital asset world.

South Korea Plans Crypto Management System Combat Tax Evasion

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South Korea’s National Tax Service (NTS) is taking a firm stance against crypto tax evasion with the development of a “virtual asset integrated management system.” This system, currently in its preliminary consulting phase, aims at effectively analyzing and managing the information collected from mandatory virtual asset transaction reports.

The move comes amidst a resurgent crypto market, with Bitcoin reaching new highs of $71,231 on March 11, 2024. This renewed interest, coupled with the growing presence of virtual assets in institutional settings, has highlighted the need for robust taxation and anti-money laundering (AML) measures.

While the crypto business operators were required to report the details of any transactions to the Corporate and Income Tax Acts, there was a loophole in the absence of relevant analysis and management mechanisms. The new integrated system aims to plug this hole and ensure ‘fair taxation,’ preventing attempts that exploit the anonymity and decentralization of virtual currencies.

Global Push for Stricter Crypto Regulations

South Korea’s initiative aligns with the global trend of harder digital assets regulations. European Union (EU) actively makes market regulations, and the USA imposed new tax reporting requirements for virtual assets. Most of these regulations are recommended by the Financial Action Task Force (FATF), which is an intergovernmental organization focusing on anti-money laundering and terrorist financing activities.

PwC recently reported that global cryptocurrency rules are guided by what the FATF proposed, while the most extensive regulations for virtual asset businesses are being put into place in the world. These rules help maintain transparency and order in financial markets, prevent crime, and protect investors.

The possibility of the virtual asset management system is much more than simply raising tax revenue. By improving the transparency of crypto transactions, it fosters greater legitimacy that would draw more institutional investors to the cryptocurrency industry. It could even have an impact on whether South Koreans choose to stay in crypto for the long haul.

However, there are still some worries about the possibility of overreach that could stifle innovation. Finding the right regulatory middle-ground and encouraging the creation of a vibrant crypto culture in South Korea will be critical to its future success.

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South Korea To Discuss Bitcoin ETFs Approval And NFTs With SEC Chair

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The Head of South Korea’s Financial Supervisory Service (FSS) will meet Gary Gensler, who is the chair of the US Securities and Exchange Commission (SEC), in May this year, according to a report by Edaily. Non-fungible token (NFT) legal status and SPOT bitcoin exchange-traded funds (ETFs) approval will be among the topics to be discussed during the meeting.

NFTs repre­sent digital tokens of unique and scarce­ digital assets like art or music. Their re­cent popularity comes as cele­brities sold NFTs for millions. However, South Kore­a does not classify NFTs as regulated “virtual asse­ts” under crypto laws. The governme­nt believes NFTs have­ less financial market impact than cryptocurrencie­s.

However, as demand and speculation increase, Lee Bok-hyun has to meet with Gensler to see if NFTs should be treated as virtual assets under the law. If NFTs are considered virtual assets, then they may be governed by the FSS, which will impose some regulatory requirements on issuers and traders. These conditions may involve securing a license, teaming up with a bank, and obeying rules against money laundering.

Spot Bitcoin ETFs Approval in South Korea

Another topic of discussion between Lee Bok-hyun and Gensler will be the approval of spot bitcoin ETFs in South Korea. A spot bitcoin ETF is a fund that tracks the price of bitcoin and trades on a stock exchange. It allows investors to gain exposure to Bitcoin without having to buy, store, or manage the cryptocurrency themselves.

South Korea has banned local institutions from launching crypto-related products, such as ETFs, futures, or derivatives. It has also prohibited companies from brokering overseas-based spot bitcoin ETFs, which are available in countries like Canada and Brazil. The government has cited concerns over the volatility, security, and legality of cryptocurrencies, as well as the lack of investor protection.

However, both the ruling and the opposition parties in South Korea have announced that they will support the launch of local spot bitcoin ETFs in their election pledges ahead of the general election on April 10. They have argued that spot bitcoin ETFs will provide more options and transparency for investors, as well as boost the competitiveness and innovation of the local crypto industry.

Regulatory Framework

Meanwhile, South Korea is getting ready to launch the initial stage of its regulatory framework for cryptocurrencies, which will be put into effect in July. The intention of this framework is to guard against scams and hacking that crypto investors are prone to and manipulation of the markets through imposing some guidelines on crypto-services providers such as exchanges, wallets, and custodians.

The second half of the regulatory framework, which is still under development, will focus on standardizing the issuance and disclosure of crypto tokens, such as initial coin offerings (ICOs) and security token offerings (STOs). The framework will also address the taxation and accounting of crypto assets, as well as the supervision and enforcement of the regulations.

The meeting between Lee Bok-hyun and Gensler will be an opportunity for South Korea and the U.S. to exchange views and experiences on regulating the fast-growing and complex crypto market. It will also reflect the increasing global interest and attention on NFTs and bitcoin ETFs, as well as the challenges and opportunities they pose for the financial system.

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ETF Legislation’s Uncertain Future Polarizes South Korea’s Political Landscape

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South Korea’s democratic opposition party recently suggested a plan to allow local issuing, making available and dealing with Exchange Traded Funds (ETFs), including those tied to Bitcoin and other cryptocurrencies. Nevertheless, the ruling Peoples Power Party has faced considerable opposition to this move. The governing group is wary that these ETF investments can retard the growth of the domestic capital market.

The Financial Services Commission has not made a decision yet on this matter. The result is an ongoing debate expected to continue even after the forthcoming general elections. Democratic Party recommends the integration of digital assets within institutional frameworks as per the global trends. They emphasize the prospect of expanding investment opportunities and fortifying national assets via tax exemptions.

We would allow the issuance, listing, and trading of spot ETFs with Bitcoin and other underlying assets. […] Once the 22nd National Assembly is inaugurated, we will immediately push for revision of the Capital Markets Act, said the Democratic Party’s Policy Committee.

On the other hand, the ruling party alternatively opts for a more cautious approach, expressing concerns about likely capital outflows from the stock market to the much more volatile digital asset market. Some analysts have suggested that this “strategic ambiguity” is a ruling party strategy meant to accommodate varied interests within an election landscape.

There are concerns that if Bitcoin spot ETF investment is allowed, money in the domestic stock market could flow out into the virtual asset market, […] It is an understandable issue, said a key ruling party official.

The Future of Bitcoin ETFs In South Korea

The future of South Korean spot Bitcoin ETF legislation depends on the result of the election and the subsequent political dynamics, given the significant differences between the ruling and opposition parties. Financial authorities have stated that they are open to considering the proposal but have not established a definitive timeline.

The recent approval by the U.S. Securities and Exchange Commission (SEC) for the listing of spot Bitcoin ETFs has led South Korean authorities to caution against brokering ETFs listed overseas, citing potential breaches of existing regulations. This highlights the regulatory challenges and uncertainties surrounding South Korean spot Bitcoin ETFs.

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OKX Expands Into Argentina While Faces Scrutiny In South Korea

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One of the world’s top global cryptocurrency exchanges, OKX, has officially opened its services in Argentina. By this, OKX aims to cover a growing portion of interest in the demand for crypto services in one of the most bubbling markets of Latin America. Easing operations for Argentine users at OKX will be a goal that will seek to support the Spanish language and popular local payment methods through its peer-to-peer platform.

The exchange is known for reliability which has deep liquidity for all kinds of assets, cryptos for trading, and staining features. Apart from the exchange, OKX is opening up its non-custodial Web3 Wallet, which is a secure platform for the convenience of handling Decentralized Finance (DeFi) activities, trading in NFTs, and diversified Decentralized Applications (dApps).

Hong Fang, President of OKX, expressed delight at expanding their services into Argentina, said:

We’re pleased to officially launch our latest expansion of our world-class crypto exchange and Web3 wallet in one of Latin America’s most vibrant crypto markets. As pioneers at the nexus of technology and finance, our user-centric approach aims to accelerate adoption by meeting local needs first.

Additionally, Alejandro Estrin, OKX Argentina’s Country Manager, highlighted that the role of trust is key for the platform to become mainstream. This will be generated through a base built on transparency, security, and compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations, with users.

OKX Faces Probe In South Korea

Despite the global success, it comes under South Korean scrutiny on suspicion of rule violation. The Digital Asset Exchange Association (DAXA) reported the exchange to the local authorities for trading without appropriate registration. Notably, it came to light that the exchange had marketed its Jumpstart program to local cryptocurrency users through the use of Telegram influencers.

Although OKX has explicitly denied the provision of services to South Korean investors, the association has said that the promotional activities of the exchange were more toward Korean users, which could be against the regulations. DAXA has forwarded the case to the Financial Intelligence Unit (FIU) to investigate further.

In regard to the accusations, OKX highlights the observance of compliance and doesn’t even render support in the Korean language for its activity on the website, hence revealing the absence of willingness to operate in-country. However, the means of the advertisement that addresses the Korean user still leaves concern.

However, the result of the FIU’s investigation would determine whether OKX had violated regulations regarding the operation of undeclared virtual asset businesses in South Korea. However, regulation holds an important role for exchanges that want to enter into the new markets, holding trust and integrity.

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South Korea Cracks Down On Crypto Crimes With Harsh Penalties

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South Korea is preparing to enforce a new law that will protect crypto asset users from market manipulation, illegal trading, and information abuse, according to the local media. The law, which will take effect on July 19, 2024, will impose heavy fines and prison sentences for offenders, including life imprisonment for those who make more than 5 billion won from crypto-related crimes.

The law, officially known as the Virtual Asset User Protection Act, was passed by the National Assembly in July 2023, with a one-year grace period. The Financial Services Commission (FSC), the country’s top financial regulator, announced on Wednesday that it had completed the preliminary legislative notice on the enforcement decree and supervisory regulations of the law.

The FSC said that the law aims to address various concerns within the virtual asset landscape, especially the prohibition of market manipulation, illegal trading practices, and the misuse of undisclosed material information related to virtual assets. The FSC also said that it is setting up infrastructure for supervisory, inspection, and investigation tasks as stated in the law.

Severe Penalties For Violators

According to the law, offenders who violate the regulations will face criminal prosecution, including imprisonment for a minimum of one year, or fines ranging from three to five times the amount of illegal profits. In cases where unfair profits exceed 5 billion won, perpetrators may face a maximum sentence of life imprisonment, coupled with fines equivalent to twice the amount of unfair gains.

The law also stipulates that virtual asset business operators, such as exchanges, must adhere to stringent regulatory directives issued by financial authorities. For example, they must ensure the secure management of user deposits held in banks for virtual asset transactions, and securely store over 80% of users’ virtual assets’ economic value in offline storage, distinct from internet-connected systems, to mitigate risks like hacking or system failures.

Additionally, they must either acquire insurance coverage or set aside reserves equivalent to over 5% of the total economic value of virtual assets, excluding those stored offline. These measures will mitigate potential losses and safeguard users’ assets in unforeseen circumstances.

A Crypto Hub With Consumer Protection

South Korea is one of the leading countries in the world in terms of crypto adoption and innovation. However, it has also witnessed several cases of fraud and scams involving virtual assets. For instance, the CEO of Bitsonic, a former major crypto exchange, was sentenced to seven years in prison for his involvement in a $10 million fraudulent scheme that involved inflating the trading volume and price of Bitsonic Coin, the exchange’s native token.

The FSC said that the new law will help prevent such incidents and enhance consumer protection within the virtual asset realm. The FSC also said that it will oversee compliance with the law, conducting routine inspections of virtual asset business operators to ensure adherence to regulations.

By introducing stricter regulations and penalties for crypto crimes, South Korea aims to become a crypto hub that balances innovation and consumer protection. The law is expected to boost the credibility and transparency of the virtual asset industry, as well as the trust and confidence of the users.

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South Korea Takes Action Against Haru Invest Leadership

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South Korean authorities have brought forth allegations against Haru, a crypto yield platform, indicating that it misrepresented risks to its depositors while enticing them with a lucrative 12% return. In a notable development, South Korean prosecutors announced on Monday the arrest and detention of three top executives from Haru Invest, among whom are the co-CEOs.

South Korea’s Anti-Corruption Drive

Seoul prosecutors have leveled accusations against the trio, alleging the misappropriation of approximately 1.1 trillion Korean won (equivalent to $826 million) in cryptocurrencies from roughly 16,000 users. An official from the Seoul Southern District Prosecutor’s Office confirmed these details to The Block. Additionally, it’s reported that Haru purportedly entrusted a significant portion of its client deposits to a single individual while falsely assuring investors that their funds were managed through “risk-free distributed investment techniques.” Notably, Haru Invest enticed clients with the promise of up to a 12% yield for users of its Earn Plus product.

Local authorities have been actively investigating both Haru and another crypto lender, Delio, following the abrupt suspension of withdrawals on June 14, 2023. Delio attributed the suspension to the sudden cessation of deposits and withdrawals earlier that day at Haru Invest, with whom Delio had previously collaborated. Simultaneously, Haru lodged a criminal complaint against B&S Holdings, a consignment operator, alleging deception and citing losses exceeding $260 million due to the collapse of FTX. South Korean prosecutors had previously issued an arrest warrant for an individual identified as Bang, the majority shareholder of B&S. However, due to privacy regulations in South Korea, Bang’s full name remains undisclosed.

The unfolding saga sheds light on the intricate web of alleged deceit and financial malpractice within the crypto industry. The arrest and detention of Haru Invest executives mark a significant development in the ongoing investigation into what appears to be a far-reaching and elaborate scheme. Authorities remain vigilant in their pursuit of justice amidst mounting concerns over the integrity and transparency of crypto investment platforms in South Korea and beyond.

South Korea May Abolish Crypto Tax Amid New Tax Reform

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The South Korean government is considering whether to exempt cryptocurrency gains from income tax as part of its new tax reform plan. Jeong Jung-hoon, deputy minister of the tax and customs office for the Ministry of Economy and Finance, said on Wednesday that the National Assembly should debate whether to include crypto assets in the proposed abolition of income tax for financial investments, ZDNet reported.

The tax reform plan, announced on Wednesday, aims to stimulate economic activities, stabilize people’s livelihood, strengthen fiscal sustainability and tax fairness, and enhance taxpayer convenience. One of the key policies is to rescind the taxation on financial investments, such as stocks and funds, to encourage the accumulation of wealth and financial planning of citizens.

The administration under President Yoon Suk-yeol also intends to lower the top corporate tax rate from 25% to 22% and simplify the tax bracket from four to two or three.

Crypto Tax Regime To Take Effect In 2025

The country’s crypto tax regime, which was postponed by two years in December, is set to take effect on Jan. 1, 2025. Under the current law, taxpayers with more than 2.5 million Korean won ($1,865) in digital asset gains in a year will have to pay a 22% tax on their profits. The tax regime on financial investment income is scheduled to commence on the same day.

Jeong said that the government plans to submit an amendment to the income tax law regarding financial investment taxation in late January or early February, according to ZDNet. The national election for the National Assembly is slated for April 10, giving the current lawmakers a narrow window to review and pass the proposed amendments.

The issue of crypto taxation has been controversial in South Korea, as some argue that it is unfair to tax digital assets that are not legally recognized as currencies or financial assets. Others contend that crypto taxation is necessary to prevent tax evasion and money laundering and to align with the global trend of regulating the crypto market.

The government has also implemented strict measures to monitor and crack down on illegal activities in the crypto sector, such as requiring real-name verification for digital assets transactions and banning cross-trading on crypto exchanges.

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