South Korea Passes Cryptocurrency Bill, Industry Advances in Asia

Audy Castañeda
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South Korea Passes Cryptocurrency Bill, Industry Advances in Asia

The South Korean Parliament passes the virtual asset user protection bill to prevent crises like the collapse of Terra Luna. The new law requires digital asset companies to secure customer funds, and maintain a certain amount of reserve capital. South Korea’s offer to extradite Terra co-founder Do Kwon on fraud charges puts this country in competition with the United States.

The South Korean Parliament passed a new virtual asset user protection bill to codify the rules that could have prevented the collapse of Terra Luna.

The law consolidates 19 cryptocurrency-related pieces of legislation, including definitions of digital assets, penalties for crimes such as insider trading and market manipulation, and expanding the authority of the Financial Services Commission (FSC).

The new legislation is geared towards protecting investors and addresses market manipulation and unfair trading practices.

South Korean Bill Regulates Exchanges to Protect Investors

The much-needed legislation puts cryptocurrencies under the jurisdiction of the Financial Services Commission, which will oversee cryptocurrency service providers. These include exchanges and custodians.

Under the new law, digital asset firms are required to secure customer funds, maintain a certain percentage of reserve capital, and keep necessary records.

South Korean platforms Haru and client Delio halted withdrawals in June after one of Haru’s service providers violated their agreement. Haru later laid off 100 employees to reduce risk, as customers unable to withdraw funds took legal action.

The chairman of the country’s National Policy Committee, Back Hye-ryun, said South Korea’s new crypto bill would focus first on investor protection. Existing capital markets laws will continue to govern securities, while the new bill will cover Bitcoin and other assets.

Critically, the new bill means that South Korea is firmly positioned to compete with its Asian rival, Hong Kong, in attracting crypto investors. While strict, Hong Kong’s new digital asset laws provide companies with a strong foundation for operating in the region.

In early 2023, Gemini co-founder Cameron Winklevoss predicted that Asia would spur the next bull market.

Do Kwon Extradition Still at Stake

South Korean prosecutors believe Terra co-founder Do Kwon defrauded investors and want him extradited from Montenegro. Kwon created and promoted the TerraUSD stablecoin and its sister token LUNA as the holy grail of financial independence.

TerraUSD was held at $1 through an algorithm Kwon developed to mint and burn LUNA depending on whether Terra was above or below $1.

Meanwhile, Kwon is currently serving a four-month sentence in the Balkan nation for passport fraud.

South Korea’s offer for Kwon’s extradition is competing with the United States. Thus, the Securities and Exchange Commission (SEC) has filed eight charges of fraud. Montenegrin authorities said it is not a foregone conclusion which country will honor the nation’s extradition request.

The decision will be based on the severity of each country’s charges against Kwon, among other things. Kwon’s lawyers previously said the SEC has no authority to bring charges against the Terra founder.

In another vein, Bloomberg reports that jurisdictions around the world are actively working towards regulating digital assets. Hong Kong and Dubai are seeking to attract crypto investment, while the European Union recently passed its Markets in Cryptoassets (MiCA) regulation. Meanwhile, US agencies have implemented strong measures after a series of explosions, including the FTX exchange’s bankruptcy.

By Audy Castaneda

Bitcoin Prison Scheme, FACCT Senior Manager Arrest, and Other Cybersecurity Events

Audy Castañeda
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Bitcoin Prison Scheme, FACCT Senior Manager Arrest, and Other Cybersecurity Events

The most important news from the world of cybersecurity this week have been compiled.

The four top news of the week on cybersecurity are presented below:

  • The head of the FACCT department was detained in Kazakhstan at the request of the United States and arrested in absentia in the Russian Federation.
  • Cryptographer LockBit has requested $70 million from semiconductor maker TSMC.
  • In Australia, a prisoner pulled off a $2 million Bitcoin scheme.
  • The FBI has taken over several domains related to BreachForums.

Head of the FACCT Department Detained in Kazakhstan at the Request of the United States and Arrested in Absentee in the Russian Federation

On June 22, Kazakh authorities, at the request of the United States, detained Nikita Kislitsin, head of the Department for the Development of Solutions for Comprehensive Countermeasures to Complex Cyber ​​Attacks at FACCT (formerly Group-IB), as reported by his colleagues.

The charges against him became known in 2020. The US Department of Justice later released a 2014 finding on the alleged involvement of a Russian in a conspiracy to sell stolen Formspring forum credentials in 2012 (before starting at Group-IB).

FACCT representatives said that the charges against Kislitsin are not related to the company itself and related to the period of his work as a journalist and cybersecurity researcher. They are sure that there were no legal grounds for detaining their colleague.

LockBit Ransomware Requests $70 Million from Semiconductor Maker TSMC

LockBit ransomware operators claimed they successfully hacked the world’s largest semiconductor manufacturer, TSMC, and demanded a ransom of $70 million.

According to the originally posted screenshots, the attackers gained access to a significant number of email addresses and credentials allegedly owned by TSMC for various internal systems. This information was later removed and a ransom message appeared in its place.

An investigation is currently underway with the participation of law enforcement officers. While the procedure lasted, the semiconductor manufacturer stopped working with the affected supplier.

In Australia, a Prisoner Succeeded in a $2 Million Bitcoin Scheme

Ishan Sinar Sappidine, who is serving a 12-year sentence in Australia for organizing a pyramid scheme, convinced at least six inmates to transfer more than $2 million to accounts under their control under the guise of investing in bitcoin. Among the victims of the scammer was the famous Australian rugby player Jarryd Hayne.

Due to the lack of internet access, the inmates turned to third parties outside the prison to transfer funds to the scammer. Despite assurances of a significant return on investment, the victims never received any payment.

The country’s authorities launched an investigation into this fact, and Sappidin was transferred to a prison with a stricter regime.

FBI Seizes Multiple BreachForums-Related Domains

US law enforcement gained control of online hacker forum BreachForums’ backup domain three months after its founder and administrator, Conor Brian Fitzpatrick, known as Pompompurin, was arrested.

The DNS servers of all captured domains were changed to ns1.seizedservers.com and ns2.seizedservers.com, which are often used by law enforcement in such cases.

The operation also affected one of the sites of the news resource DataBreaches.net, which was used to report on data breaches: Breaches.net. Media representatives have already petitioned the FBI to challenge the domain seizure.

By Audy Castaneda

Elliptic: Recent Cryptocurrency Donations to Russian Military Amount to $20 Million

Marina Meza
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Elliptic: Recent Cryptocurrency Donations to Russian Military Amount to $20 Million

Elliptic Connect’s “Crypto in Conflict” report examined the cryptocurrency operations of Russian military fundraising groups, which were further disrupted by the failed Wagner rebellion on June 23.

Although the number may still seem small compared to Ukraine, nearly two-thirds of these funds involve US-sanctioned entities, emphasizing the continued risks for virtual asset services.

Crypto Funds to Russian Forces Estimated at $20 Million

Entities sanctioned include a variety of individuals, groups, and informal networks that have embraced cryptocurrencies for a variety of reasons. For some, like the PMC Wagner mercenary group “Task Force Rusich”, they are a source of fundraising in addition to a comparatively more lucrative fiat donation campaign.

Within a year of the start of the invasion, Ukraine’s highly publicized and successful cryptocurrency donation campaign had raised at least $212 million. This constituted a formidable 20% of all major Ukrainian popular fundraisers. Meanwhile, pro-Russian military acquisition and disinformation groups had raised only $4.2 million.

However, since then, the identification and sanctioning of new Russian financiers by NATO allies has been greater. Elliptic’s research team calculates that pro-Russian crypto donations are very close to $20 million.

On February this year, Elliptic expressed via Twitter:

“Launching our latest report: Crypto in Conflict where we have conducted an in-depth analysis into the use of cryptoassets on both sides of the war – ranging from humanitarian causes to sanctioned groups suspected of war crimes.”

For others, cryptocurrencies are used more as an incentive. Senior officials of the so-called Donetsk People’s Republic, which counts promoters of cryptocurrency Ponzi schemes and sanctioned individuals among their ranks, claim to reward defectors and those who provide information on Ukrainian military positions with Bitcoin.

Task Force Rusich has suggested that its supporters may bury dead Ukrainian soldiers and demand Bitcoin from their families. This in exchange for the location of their final resting places.

Exchanges, Main Gateway to Cryptocurrency Transfers

Compared to Ukraine, which surpassed tens of millions of dollars in cryptocurrency donations in a matter of days after the full-scale invasion, the pro-Russian crypto commitment remains small. However, the increasing focus of sanctions regimes on Russian military equipment financiers emphasizes the continued need for effective compliance regimes by virtual asset services.

Notably, sanctioned pro-Russian entities have also participated in decentralized finance (DeFi) protocols, including decentralized exchanges, cross-chain bridges, and non-fungible token (NFT) services.

Regarding the destination, exchanges seem to play a fundamental role. Elliptic researchers looked at the types of virtual asset services that are typically exposed to Russian military fundraising using on-chain data. Tracing collectors’ cryptocurrency transactions reveals that centralized exchanges are by far the most common destination for funds.

Over 80% of observed funds originating from these entities end up on exchanges. This highlights the significant risks of penalty exposure for such services if compliance precautions are not taken.

This implies that various exchanges act as key entry and exit points for virtual assets used in Russian military financing. Nany of these entities are under international sanctions; therefore, the participation of exchanges in cryptocurrency transactions could lead to increased regulatory attention and possible legal consequences.

Virtual asset services will therefore need to take measures to mitigate risk and ensure compliance with sanctions regulations if they want to avoid legal complications and reputational damage.

By Marina Meza

UK Passes Bill Establishing Cryptocurrencies and Stablecoins as Regulated Financial Activities

Audy Castañeda
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UK Passes Bill Establishing Cryptocurrencies and Stablecoins as Regulated Financial Activities

On June 28, King Charles III gave Royal Assent to a landmark bill to “regain control of the financial services rulebook”.

The Financial Services and Markets Bill 2023 was passed by the upper house of the UK parliament on June 19. It includes measures to bring crypto assets and stablecoins into the realm of regulation, giving them powers to oversee the digital asset sector.

The royal assent, which represents a merely representative step in the legislative process, comes just over a week after the UK’s upper house of Parliament, the House of Lords, voted in favor of the bill. The king’s signature effectively converts the legislative proposal into law.

Originally introduced in July 2022, the new legislation gives regulators greater authority and oversight over the financial system, including cryptocurrencies; while establishing the creation of experimental programs to facilitate the use of new technologies such as Blockchain in financial markets.

“The Financial Services and Markets Act 2023 is critical to fulfilling the Government’s vision of growing the economy and creating an open, sustainable and technologically advanced financial services sector,” His Majesty’s Treasury said in a statement published on 29 June on their website.

Rocket Boost for the UK Economy

The Treasury described the bill as a “breakthrough boost” for the UK economy, which has been hit during the pandemic and its exit from Europe.

Treasury Economic Secretary Andrew Griffith said: “2023 is proving to be a banner year for reforming our financial services.” He further asserted that “This landmark legislation puts us in control of our financial services rulebook, so it supports UK businesses and consumers and drives growth.”

During discussions in Parliament, some amendments were added to the lengthy 340+ page legislative document, including proposals to treat all cryptocurrencies as a regulated activity and measures to monitor digital currency promotions and/or advertising campaigns. The proposal also covers the regulation of stablecoins under the country’s payment rules.

The legislation could attract more crypto companies to the UK from the US, which is currently trying to drive them out by ‘bombarding’ the industry with lawsuits.

Rather than implementing their own regulatory framework, policymakers in the United States have been grappling with which agency will control the asset class. Furthermore, the Securities and Exchange Commission and its Chairman, Gary Gensler, have acted on their own to proclaim that all digital assets, other than Bitcoin, are securities.

Congress has not yet officially listed them as such, and the uncertainty is causing an exodus of business, talent, innovation, and capital.

New Crypto-Specific Rules Are On the Way

As a result of the implementation of the new law, the various watchdogs – the UK Treasury, the Financial Conduct Authority, the Bank of England, as well as the Payment Systems Regulator, will be able to introduce and enforce new specific rules to regulate the sector.

According to the local government, this effort puts the UK on the path to becoming one of the “most dynamic and competitive financial services centers in the world”.

The Treasury has been consulting on its proposed rules for the sector since February in line with these objectives. Furthermore, Andrew Griffith, the Treasury’s economic secretary, already announced in April that specific laws aimed at regulating the digital currency industry could arrive in the coming 12 months.

“This landmark legislation puts us in control of our financial services rulebook, thereby supporting UK businesses and consumers and driving growth,” Griffith said in yesterday’s note.

By Audy Castaneda

Biden: New Rules and Taxes for Cryptocurrencies

Audy Castañeda
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Biden: New Rules and Taxes for Cryptocurrencies

President Biden recently said he will work to make the tax system fair: rules, taxes, and closing the “loopholes” for cryptocurrency traders.

President Biden made a promise regarding the crypto industry and the traders that are part of it, ahead of his upcoming presidential campaign.

According to the current President, in fact, he will strive to make the current tax system fair by closing tax loopholes for cryptocurrency traders and imposing new taxes. President Biden previously tweeted that these loopholes were costing the government $18 billion in lost tax revenue. In fact, for some time, cryptocurrency traders have been able to avoid taxes by exploiting this loophole.

As reported in a transcript released by the White House, the president said on Wednesday that they “will make the system fair by closing the loopholes for cryptocurrency traders and hedge fund managers.”

What Are the “Crypto Loopholes” Biden Refers to?

In May, President Biden hinted that he would close the loopholes in the cryptocurrency sector. In fact, on his official Twitter account he had already stated the following:

“We don’t have to guess what MAGA House Republicans value. They are telling us.”

All of this therefore confirms that, according to Biden, Congress should close “tax loopholes that favor rich cryptocurrency investors,” estimating that these loopholes have led to a loss of approximately $18 billion in tax revenue.

Additionally, this view was one of his exceptions regarding a debt deal during the US default crisis. The crypto “loophole” in question likely refers to the ability of traders to sell and repurchase cryptocurrencies in short periods of time, thus avoiding the application of higher tax rates.

Either way, President Biden is likely to further elaborate on his plan to regulate cryptocurrency merchants more strictly during the course of his campaign.

Following President Biden’s comments, the price of Bitcoin fell 1.3%, falling to just under $30,000. Currently, BTC represents more than half of the total cryptocurrency market. However, since then, the price has risen back above $30,500.

President Biden’s Crypto Speech at the G7 Summit

During his speech at the g7 summit on budget negotiations, President Biden addressed the issue of cryptocurrencies, reporting that he met with all four congressional leaders before leaving for the summit and stressing the importance of a bipartisan deal as the only way forward.

In addition, he highlighted his commitment to submit a proposal to cut spending for more than one trillion dollars. Regarding other proposals, Biden said that many of them are completely unacceptable.

Additionally, a video posted by Sky News shows President Biden speaking about cryptocurrencies by saying the following:

“I will not accept a deal that protects tax evaders and cryptocurrency traders at the expense of food helpers.”

Biden’s statement comes at a time when US regulators are standing still. increase control in the cryptocurrency sector. Therefore, it is very likely that there will not be a debt agreement that protects crypto investors in the country.

The President said that he would not accept a tax deduction of 30 billion dollars for the oil industry. He also spoke about the $200 billion profit the industry made last year, arguing that millions don’t need a $30 billion stimulus at the cost of the lives of 21 million Americans.

By Audy Castaneda

SEC Commissioner Defends a Legal Framework for the Crypto Sector

Audy Castañeda
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SEC Commissioner Defends a Legal Framework for the Crypto Sector

US Securities and Exchange Commission (SEC) Commissioner Hester Peirce says a legal framework is necessary for the crypto sector.

According to of the US SEC commissioner, the agency must establish specific rules for the virtual currency market. In her opinion, regulators need to have a better approach to address the crypto sector. “The SEC can do better,” she claims.

Peirce’s remarks come at a time of uncertainty for the cryptocurrency market. In early June, the agency heavily attacked major trading platforms. Likewise, it classified a significant number of tokens as “securities”.

According to the aforementioned official, aggressiveness should be replaced by a more conciliatory approach. In this sense, she believes that the laws should not assume that everything related to the cryptocurrency market should be classified as a “financial asset.”

The Crypto Sector Needs a Different Approach

So far, the regulatory agency seeks to apply the old securities laws to new digital assets. Consequently, for the SEC, the crypto sector fits perfectly into the securities provisions that were created at the beginning of the 20th century.

This forced adaptation, in the style of the legend of the Procrustean bed, generates tensions between the authorities, on the one hand, and companies and the crypto community on the other. Companies like Coinbase and congressional Republicans strongly criticize the agency for its extremism.

“I think we have to make sure that whatever regulatory framework you have doesn’t just assume that everything is a financial asset,” Peirce asserts. In her opinion, cryptocurrencies go much further than that.

In other words, although these assets are eminently financial, they also have other uses, such as the ability to allow people to interact without the need for a financial entity or intermediary.

Under these premises, the commissioner, also nicknamed “Crypto Mom”, reaffirmed that regulations for the crypto sector must be more open. This view is in stark contrast to that of the SEC and her boss, Gary Gensler. On June 27, Hester twitted the following:

“Protecting investors is important, but the government needs to have a good reason to prevent people from investing their own money as they choose.”

Cryptocurrencies as Social Media Platforms

The crypto sector is not simply a cold financial asset people invest in to win or lose and then withdraw. This usual vision of the traditional financial world is substantially alien to the digital currency ecosystem, as the commissioner hints.

“This is useful in the financial context, but also in building a social media platform or anything else,” he argued. Peirce also took to Twitter to share her SEC statement and make additional comments. Consequently, the commissioner expressed that the protection of investors is something necessary and important.

With this, the expert considers that a framework is needed that is not so inflexible and incapable of adapting to the new uses of cryptocurrencies and the chain of blocks. With this position, the official once again distances herself from the agency’s vision.

Pierce has been critical of the SEC’s move to contain the crypto sector. She claims that laws “can’t be reserved and then all of a sudden [the regulators] return five years later with a bunch of enforcement actions.” With this it is evident that within the agency not everyone is happy with Gensler’s extremist approach.

By Audy Castaneda

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