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South Korea Legislates Institution of a Legal Basis For Cryptocurrencies

South Korea Legislates for Institution of Crypto Legal Basis

South Korea Legislates Institution of a Legal Basis For Cryptocurrencies

On 27 November 2019, South Korea passed an amendment to establish a legal framework for virtual currencies by categorizing them as digital assets. As reported by local news outlet Korea JoongAng Daily, the bill was passed by the National Assembly’s national policy committee, stating that, thanks to the bill, “cryptocurrency is one step closer to being legitimate in Korea”.

According to the bill, all the crypto exchanges and firms within South Korea will be required to report to and register with the South Korean monetary authority, Financial Services Commission’s Financial Intelligence Unit (FIU) to make the system more transparent and to legitimize investments. Additionally, the new bill strictly condemns the practice of money laundering by the companies.

The bill also mentions setting up a protocol for financial transactions that the companies will be expected to adhere to. These ground rules should be in compliance with the standards of the Financial Action Task Force (FATF). Apart from this, all companies will have to acquire an Information Security Management System (ISMS) certificate from the state-operated Korea Internet and Security Agency (KISA). The report also states, “…those operating false-identity bank accounts will not be approved”.

The bill is yet to be approved by the judiciary committee. Once approved, the law is expected to come into effect in 2020.

As reported back in May 2019, the South Korean government decided to do away with the guidelines for Anti Money Laundering (AML) within virtual currency, and introduced legislation to directly regulate cryptocurrency exchanges. The amendment required cryptocurrency exchanges to provide their full analysis of AML data to banks in order to maintain their accounts.

 

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Line’s Crypto Exchange Nears Japan Approval

Line's Crypto Exchange Nears Japan Approval

Japan’s most popular communication app, Line, is heading towards the country’s approval to roll out its crypto exchange in the home nation. As reported by Bloomberg on 20 June 2019, the license is expected to be issued by Japan’s Financial Services Agency (FSA) within this month. If so, the operations are lined up to kick off a few weeks post the regulatory authorization.

The platform, dubbed as BitMax, will extend trading facilities to about 80 million users in Japan. This will enable trading of major cryptocurrencies such as Bitcoin including Line’s own token, Link, the report claimed. Line’s shares spiked up by 4.6% post the report.

About a year ago, Line launched the crypto exchange, BitBox. The platform, however, was denied approval by Japan and the US which rendered its services unavailable to the countries. BitMax has been designed to use the same back-end technology as BitBox.

The report stated that Line has another banking license on halt in Japan which is unlikely to be issued anytime until next year. The issuance of the above said license will bring forth a tight amalgamation between cryptocurrencies and services such as online shopping.

In March 2019, the FSA granted a license to tech giant Rakuten’s crypto exchange, which replaced Everybody’s Bitcoin Inc, acquired by the company for USD 2.4 million. Yahoo Japan’s crypto exchange Taotao was launched on 30 May 2019 after receiving approval from the FSA.

However, the FSA has been tightening its anti-money laundering regime to inspect crypto exchanges in accordance with the FATF inspection in a bid to up its financial security framework. This has been Japan’s top priority to avoid criticism from the intergovernmental watchdog as the country chairs this year’s G-20 summit to be held on 28 and 29 June. This is clearly reflected in the fact that as of March 2019, only 19 crypto exchanges had received a license from the FSA as opposed to the 190 applications received by the agency in 2018.

 

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Yahoo! Japan’s crypto exchange platform scheduled to launch on 30th May, 2019

Japanese backed cryptocurrency exchange company Taotao (formerly known as BitARG) is all set to take off on 30 May 2019 after almost a year of being under development. About 40% of the stake is owned by Yahoo! Japan, a joint venture between the American internet company Yahoo! and the Japanese company SoftBank.

The announcement was made via the company’s official Twitter account, which disclosed that the virtual currency trading would begin on May 30 from noon at local time.

Taotao launch announcement via tweet

Apart from the online platform, the provision of a mobile app is made available by the company for convenience.

Initially, transactions will be offered in Bitcoin (BTC) and Ethereuem (ETH). However, margin trading will be provided in three additional preferences: XRP, Litecoin (LTC) and Bitcoin Cash (BCH).

Yahoo Japan purchased the shares in Taotao through its subsidiary YJFX, a forex transaction platform. It is believed that the minority stake cost the firm around JPY 2B (USD 19M). Taotao is licensed by Japan’s Financial Service Agency (FSA), which makes Yahoo Japan’s investments seem economically viable. Being one of the most popular websites used in the country, it will perhaps play a substantial role in the adoption prospects of cryptocurrency bolstering the idea of taking to modern technology.

Although Japan has seen emerging popularity among traders amid the Bull market, several strict regulations are imposed on the market owing to the anti-money laundering policies as part of FSA’s drive against non-compliant cryptocurrency exchanges. This is also done in view to put out a better outlook before the FATF in this year’s G20 meeting which will be chaired by Japan.

 

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Japan Regulator to Inspect Crypto Exchanges for AML Policies Ahead of FATF Inspection

Japan Regulator to Inspect Cryptocurrency Exchanges for AML Policies Ahead of FATF Inspection

The financial services agency (FSA) is reportedly stepping up its anti-money laundering campaign against non-compliant cryptocurrency exchanges, reports Nikkei Asian Review.

According to the report, “Japan’s anti-money laundering regime is expected to undergo an inspection by an intergovernmental body [financial action task force (FATF)] this fall, and the FSA is eager for a good review”. To this end, in order not to fall short of expectations, as it is also expected to chair this year’s G-20 meeting, it is tidying up its house to make up for any shortcomings that may exist:

“The FATF’s investigatory body will come to Japan this fall to assess domestic money laundering laws. It is expected to look at cryptocurrency exchange operators, banks and credit unions, according to a senior FSA official, so there is a pressing need to develop countermeasures.”

The forthcoming rating is important to the country as back in 2008 “the FATF gave Japan its lowest possible rating in regard to financial institutions identifying their clients,” this it did stating that Japan had an “insufficient legal framework.”

One of the major concerns of the FSA is the offering of anonymous services, and the agency intends to bring to cross-hairs all financial institutions to include crypto exchanges and banks involved in such transactions; in the bid to protect the financial security framework and also strengthen its AML policies by ensuring that cryptocurrency service providers, as well as financial institutions, are keeping up with the standard.

Japan is reportedly the first country to introduce a registration system for cryptocurrency exchanges in order to combat AML practices. Moreover, in April, the Japanese Prime Minister Shinzō Abe commissioned a cryptocurrency governance manual which is expected to be part of the agenda during the forthcoming G20 Summit, therefore, placing the country on a reputation scale in front of all members of the G-20.

The current move by the FSA is in concert with the recent unscheduled inspection carried out on two exchanges – Huobi Japan and Fisco Digital Asset Group – when it considered the administrative setup which it considered were insufficient to cater for the security of clients.

 

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Japan’s Financial Services Agency Hits Exchanges with Unexpected Inspections

Amidst a sudden drop in cryptocurrency prices at mid-week, Japan’s Financial Services Agency (FSA) reported that they had carried out a surprise inspection of two Japanese exchanges.

Bitcoin dropped 2.25% to USD 5,409.4 by 12:46 PM ET (04:46 GMT), after rising to a one-month high at USD 5,586.3 in the mid-week. The drop-in prices pushed the crypto market cap down to $176.7 billion after some notable gains over the past week.

The two cryptocurrency exchanges receiving an unscheduled visit from the official regulator, Huobi Japan, and Fisco Digital Asset Group, had no warning and provoked shock waves through Japan’s crypto community. Reuters claimed that the reason cited for the spot checks was related to both exchanges alleged inadequate customer protection and anti-money laundering (AML) safeguards. The news agency reported:

“The FSA conducted detailed checks with a view to administrative setup, considering that there are insufficient points in the management systems of the two companies and their efforts to protect customers.”

Prior to the end of 2018, the FSA received a wave of cryptocurrency license applications from exchanges granting the newly formed Japan Virtual Currency Exchange Association (JVCEA) the power to oversee self-regulation within the cryptocurrency industry. The country’s top financial regulator Toshihide Endo has suggested that the industry needs to grow under “appropriate regulation” and as such won’t need government intervention to further enforce curbs on how exchanges operate within the country.

The FSA has kept a close eye on crypto-related businesses and firms since the collapse of the Mt Gox exchange back in 2014. The agency regulated crypto exchanges by introducing a licensing scheme and conducting inspections of the exchanges for their security and compliance with anti-money laundering laws.

 

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Japan Regulator Urges Improved Security for Offline Crypto Custody

Japan Regulator Urges Improved Security for Offline Crypto Custody (1)

Cryptocurrency exchanges in Japan will be required to fortify their cold wallet storages, according to a Reuters report.

Citing a source with direct knowledge of the matter told, the report states that Japan’s financial regulator, the Financial Services Agency (FSA), is uneased by the current security levels of some exchanges as it perceives risks of internal thefts that threaten cold wallets.

To this end, the undisclosed source told the outlet that a preferred measure would be to have more than one person be in charge of the cold wallet and be placed on rotational shifts.

As Japan embraces the fintech industry to further economic growth, the watchdog will, therefore, urge cryptocurrency exchanges with security lapses to ensure they adopt the best offline security practices, given that the previous year had seen as much as USD 530 million stolen from a single exchange in Tokyo alone.

In the fall of 2017, Japan began issuing a license to cryptocurrency exchanges under its new regulation, with the second exchange announced in March to debut its services in April. With its steady oversight over the industry, Japan continues to drive interest that balances innovation and investor protection.

Cryptocurrency custody remains a crucial subject in the industry; notably one of the major concerns shared by many regulators as well as investors, which in effect has created a competitive market for custody-related solution platforms. As for crypto exchanges, the situation is direr.

Case in point, Bakkt recently experienced hiccups with its launch as the US Commodity Futures Trading Commission (CFTC) stated that Bakkt’s custody protocol would need to take further steps in protecting the cryptocurrency in order to be compliant the commission’s rules.

On the subject of cold wallets, it appears security breach may not be the only threat to funds stored offline. A recent case of trapped customer funds worth over USD 190 million in a cold wallet of major Canadian cryptocurrency exchange QuadrigaCX after the death of the CEO Gerald Cotton – who was solely in charge of the cold wallet – leaves a bitter experience.

 

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Japan’s Regulator Swamped With Exchange Applications as New Year Approaches

Japan's Regulator Swamped with Exchange Applications as New Year Approaches

Japan’s financial regulator, the Financial Services Agency (FSA) is reported to have received 190 cryptocurrency license applications from exchanges as 2019 approaches.

This happened after the FSA recently granted the newly formed Japan Virtual Currency Exchange Association (JVCEA) in Japan the power to oversee self-regulation within the cryptocurrency industry.

The JVCEA had already applied to the FSA to become cryptocurrency’s one and only self-regulatory body in the country. It also attempted to stem the tide of transactions earlier this year when it recommended its own “appropriate regulations” for growth by proposing new rules that would affect the way exchanges operate, placing privacy coin listings and insider trading under the regulatory microscope.

Another tool for limiting the transaction surge suggested by JVCEA was to enforce trading caps and restrictions according to age group, i.e. the very old and the very young. The FSA regulator has already released figures showing that in April, there were 142,000 crypto traders in Japan. That monthly figure represents a small percentage of the total of 3 million Japanese traders.

Last month, FSA’s Study Group on Virtual Currency Exchange Industry concluded its tenth meeting. The group classified tokens according to three categories: virtual currencies with no issuers (like Bitcoin), virtual currencies with issuers, and virtual currencies that not only have issuers but also distribute profits.

The country’s top financial regulator Toshihide Endo has suggested that the industry needs to grow under “appropriate regulation” and as such won’t need government intervention to further enforce curbs on how exchanges operate within the country.

The FSA commented last week that:

“We think it necessary to work with the JVCEA closely so that the association can successfully perform self-regulatory functions through the establishment and application of self-regulatory rules and monitoring of their members.”

Japan is currently the global leader in the market development of cryptocurrencies, although, in terms of public adoption, many Japanese have suggested that the prices of cryptocurrencies must become far more stable in 2019 for people to use them for regular purchases throughout all sectors across the country.

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Japan Releases New Draft Crypto Regulations to Safeguard Investors

Japan Releases New Draft Crypto Regulations to Safeguard Investors

Japan’s Financial Services Agency (FSA) responsible for regulation has published a report outlining its proposals for changes to the current rules which govern cryptocurrency exchanges.

The main purpose of the updated rules is primarily aimed at addressing hacking incidents, self-regulation, deemed dealers, privacy coins, and margin trading. The framework, which also targets ICOs, was established after 11 meetings of the FSA study group.

Last month, FSA’s Study Group on Virtual Currency Exchange Industry concluded its tenth meeting. The group classified tokens according to three categories: virtual currencies with no issuers (like Bitcoin), virtual currencies with issuers, and virtual currencies that not only have issuers but also distribute profits.

According to the FSA, no major barriers prevent the new regulation becoming law and the heightened focus on cryptocurrency by the agency is thought to be a result of highly publicized hackings earlier in the year. The new laws are aimed at preventing such incidents by strengthening the management of customer property to safeguard investors.

New regulations will demand that exchanges have net assets “equal to or more than the amount equivalent to the currency and repayment funds” and also outline measures which cryptocurrency exchanges can employ to safeguard against bankruptcy.

Japan has been developing strict measures to safeguard the space since cryptocurrency began to gain huge popularity in the country. In October, industry self-regulators, the Japan Virtual Currency Exchange Association (JVCEA), were approved by the FSA to be officially recognized in its regulatory position.

Under the new regulations, Japan will refuse registration to those companies who neither “join the accredited association and conform to the self-regulation” nor establish self-regulation. There are currently “three deemed dealers” awaiting approval: Coincheck, Lastroots and Everybody’s Bitcoin.

Such companies are not permitted to advertise aggressively and expand their business while waiting for approval, nor are they able to acquire new customers during this period. Deemed dealers are also required to post their registration status on their websites to clarify their trading status for customers and potential clients.

The report also noted that ICOs “can be subject to the securities regulation” under the Financial Instruments and Exchange Act or the Fund Settlement Act.

 

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Japanese Police Investigate 700% Increase in Suspicious Crypto Activity

Japanese Police Investigate 700% Increase in Suspicious Crypto Activity

Japan’s National Police Agency (NPA) has announced a huge hike in reports of dubious cryptocurrency transactions, most which occurred between January and October of this year.

In all, 5,944 reports from cryptocurrency exchanges were recorded, possibly linked to money laundering and tax evasion. These figures represent an eight-fold increase from the 699 cases reported in 2017.

Japan has the world’s most progressive regulatory climate for cryptocurrencies with a buoyant and energetic market. Its regulator has tightened regulation om trading and exchanges over time in order to provide a secure business environment and now requires all cryptocurrency exchanges to be screened and registered by the Financial Services Agency (FSA). In 2017, this vigilance was stepped up by the FSA also requiring a form of mandatory reporting expecting exchanges to report any suspect trading activity to the regulator.

These laws appear to have done little to prevent an escalation in cases of illegal activity, although they are at least now being brought into the public light. An NPA official commented, “It’s already been some time since the reporting system began, and it has been embraced by the industry through guidance from the Financial Services Agency.”

The cost of this crime, however, is alarming, with the JPY 660 million stolen from crypto exchanges and individual wallets swelling to a huge JPY 60 billion in only the first half of 2018.

Just this week, the National Safety Commission released its latest report on the state of the industry with regards to the misuse of cryptocurrency funds, a factor that many nations’ leaders cite as being the main deterrent towards civic adoption by central governments and banking institutions.

The main areas of misuse thrown up by the report include factors such as reuse of the same face photo by several users with different names and birth dates, multiple trading accounts initiated from a single IP address, logins from overseas on accounts with Japan addresses, as well as registration of out-of-use mobile phone numbers.

But FSA registrations continue, with 16 recent exchanges passing the screening process and another three awaiting the green light to operate, highlighting that the FSA feels that it has this situation under control.

 

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Japan to Regulate Crypto Wallet Services

Japan’s Financial Services Agency (FSA) is planning to impose regulations on cryptocurrency wallet service providers, according to a published account of its latest meeting.

The agency gathered earlier this week for its ninth cryptocurrency study group meeting. The FSA also hosts regular study group meetings to discuss various crypto regulatory issues, particularly those concerning the regulation of cryptocurrency exchanges.

A major topic of its last meeting was a plan to regulate wallet service providers, given that currently, FSA regulations are not applicable to such services as such providers are not in the business of actually trading. The agency now feels that because such providers manage transfers and storage of digital currencies, they should be brought in line with financial regulation.

It was revealed that any new regulations would not apply to wallet software developers and hardware wallet manufacturers as these are often simply coded private facilities with no company backing.

The focus is again on money laundering and as such, Financial Action Task Force (FATF) regulations will become the basis for the new regulations according to the FSA. The FATF is an intergovernmental organization that designs and promotes policies and standards to combat financial crime. Recommendations created by the task force target money laundering, terrorist financing, and other threats to the global financial system.

Other issues discussed in this ninth meeting of the cryptocurrency study group around the topic of wallet services touched on stolen funds during cyber-attacks, wallet failures, money laundering, and other risks shared by crypto exchanges.

The FSA is continually updating its cryptocurrency regulations. At this last meeting, further measures to regulate the industry were discussed, such as financial audits and the separate management of funds belonging to service providers and customers. Also, it was suggested that during a transition period for introducing new wallet regulations service providers would not be able to add new businesses, customers, or coins supported by the wallet.

 

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