Cryptocurrency News Now!: [ICON Newsletter #10] Korea legalized crypto. What does it mean for ICON?

Monday, March 16, 2020

[ICON Newsletter #10] Korea legalized crypto. What does it mean for ICON?

By ICON Newsletter • Issue #10 • View online

Dear ICONists,

About a week and a half ago, you've all seen the headlines - "Cryptocurrency Now Fully Legal in South Korea." Thousands of people took the news to social media to celebrate.

Yes, this is a positive outcome that we've all been waiting for. Yet, this has also brought a lot of confusion. Surprisingly, many people, including the journalists who broke the news, do not fully understand the actual history and implications of the new legislation. We've seen questions like:

"Wait, if cryptocurrency wasn't legal, then how are the people trading them already?"

"This means more Koreans are going to buy crypto, right?"

"This good for ICON, right?"

In today's newsletter, we'll answer these questions and much more. But first, let's check out ICON Network's key highlights from this past week:

Key Highlights:

Weekly transaction activity increased 14% vs. December 2019 levels.
44.5% of circulating supply staked, vs. 38.4% at the end of 2019.
ICON network continues to expand with 115 P-reps, up from 113 from a week ago.
Main P-reps increased i_rep to 43,120 from 40,283 the previous week, a 7% increase.
IISS 3.0 Proposal was published by the ICON Foundation. ICX Station team created summary slides. We will talk more about why voters should support this change in our next week's newsletter.
P-Rep Governance Meeting #2 was completed. We're excited that the turnout was event better than the first one.
ICON now on DAPP Review site! With the grant provided by the ICON Foundation, the recipient quickly integrated and listed ICON Dapps.
ICX_Station releases Part III of the 30+ page series on ICON's technology, ICON, deconstructed covering scalability and SCORE (Smart Contract on Reliable Environment).
Unfortunately, due to the Coronavirus outbreak, Consensus 2020 is going virtual and Blockchain Revolution Global is being rescheduled to Fall 2020.
Seoul Metro continues to run ICONLOOP's enterprise blockchain, and this time, launches car trading system.

This past week's crypto market experienced insane volatility. But, we're all still here well and alive. Let's keep pushing forward!

Thank you,

Min Kim, ICON Foundation Council

South Korea fully legalizes cryptocurrencies

We've all seen the news. But, let's go deeper into understanding the new legislature and its expected impact on the entire Korean cryptocurrency industry and the ICON project.

What happened?

On March 5th, the National Assembly of South Korea unanimously voted in favor of a bill that provides the regulatory framework for crypto exchanges, crypto-related platforms (e.g. wallets), and cryptocurrency issuers. This was the first crypto-specific legislation in the country.

Binance

@binance

#Breaking - #Crypto is now fully legal in South Korea 🇰🇷

#속보 - #가상자산 한국에서 제도권 진입 #성공적

오늘부터 한국에서는 암호화폐가 아닌 가상자산이 됐죠! 이제 막 제도권에 발을 디딘 대한민국의 혁신을 바이낸스가 응원합니다. 앞으로의 발전이 더욱 기대되네요. https://t.co/766lvoqZPM

2:17 AM - 5 Mar 2020

How did we get here?

Thankfully, we have Joseph Young in our industry. In this Cointelegraph article (Prepare for Liftoff - South Korea's Crypto Regulation Ignites in 2019), he provides a comprehensive timeline of key crypto regulation activities from the very beginning (July 3, 2017). This is a MUST READ.

It's been a very frustrating 3+ years that started with lots of back and forth between different legislatures and regulators each adding more confusion and chaos. This led to the creation of the Cryptocurrency Regulation Task Force, but we saw a prolonged silence for almost 1 year thereafter. Finally, in November 2019, a new bill centered around Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) was approved by the National Policy Committee but awaited approval from the Judiciary Committee. After another delay in the process and with the recent Coronavirus outbreak in South Korea, many assumed the approval would come mid-to-late 2020. To everyone's surprise, the bill was finally approved by the Judiciary Committee on March 5, 2020.

Act on Reporting and Using Specified Financial Transaction Information

What does this crypto-specific bill say?

South Korea is clearly working to comply with new global AML and CFT guidelines set forth by G7's Financial Action Task Force (FATF) in supervising Virtual Asset Service Providers (VASPs). VASPs here include crypto exchanges, crypto-related platforms, and cryptocurrency issuers.

Korea's crypto-specific bill amended the Act on Reporting and Using Specified Financial Transaction Information to include VASPs. Now, all VASPs must register with and be supervised by the Financial Intelligence Unit (FIU), which is operated under the Financial Services Commission (FSC). Similar to traditional financial service providers, this Act requires all VASPs to:

Work with a single bank and link real-name, KYC-ed accounts for deposits and withdrawals
Share information including transactional data
Obtain systems certification by the Korean Internet Security Agency (KISA)

So far, only the top four (4) crypto exchanges are linked to real-name bank accounts. This means that banks have not opened bank accounts for other 200 or so crypto exchanges, mainly due to unclear regulation risk. Also, only six (6) six companies and exchanges have been certified by KISA, which is a costly and lengthy process.

When does the new law go into effect?

The bill will become effective in March 2021. Although still unclear, a formal cryptocurrency taxation policy is expected to be introduced and go into effect by then.

Expected impact from the new law

South Korea now has one of the world's most comprehensive legal frameworks for the fast-growing blockchain industry. This approval of the crypto-specific bill is literally a stamp of approval for cryptocurrency and blockchain technology as a legitimate part of Korea's financial services industry.

Increased competition and market consolidation for Crypto Exchanges

Crypto exchanges and platforms can operate under a proper law and receive fair treatment from banks. As mentioned above, most crypto exchanges were denied bank accounts without cause, giving the top four (4) exchanges an unfair advantage (artificial barrier-to-entry). We believe more competition and consolidation is finally underway, perhaps even from traditional financial brokerages and payment providers.

Of course, regulation means higher compliance costs, and most crypto exchanges and platforms would not be able to sustain its operations. Only those with the best product and service would survive and the industry would be better from it.

With ICON already well-positioned in South Korea, we believe increased competition could indirectly benefit the project with easier access to and increased security for ICX which accelerates our road to mass adoption.

Simon Seojoon Kim

@seojoonkim

4/ Until now, regulatory uncertainties caused many concerns that excessive regulations on operating conditions could lead to shut down of many of the existing cryptocurrency exchanges. For instance, banks must issue virtual accounts to the exchanges for real-name deposit services

7:27 AM - 5 Mar 2020

Simon Seojoon Kim

@seojoonkim

5/ However, majority of the banks refused to provide them to most of the local cryptocurrency exchanges, without any legal grounds. In addition, despite of having the freedom in token issuance, exchange operations under no regulation had been a bottle neck in Korea.

7:27 AM - 5 Mar 2020

Increased participation from institutions

Cryptocurrency has been officially classified as an asset class, and hence, can now be purchased by institutions. Previously, fund managers could not include cryptocurrencies in their investment portfolio due to issues around accounting classification and tax implications. We still believe large institutional money is years away due to shortcomings in many areas including custody, analyst research, and valuation tools. However, we believe there will be an increasing number of institutional investments into legal blockchain funds, similar to the initial patterns we saw in the U.S. with Polychain, Pantera, and so forth.

At ICON, we are even more excited by the idea that institutions can not only invest in ICX but also directly contribute to the growth of our ecosystem. This is actually what public blockchain projects like ICON are all about. Previously, we weren't able to pitch such ideas to our partners. Now, we have the green light. To be absolutely clear, we have no such commitment from any of our partners as of today.

Fixing the crypto industry image by ending fraudulent and unethical activities

As you know, it's been the wild wild west for the crypto industry. We all heard terrible stories that put the entire industry in the negative light. Fraudulent and unethical activities will always exist even with regulation; however, we can bet the numbers will significantly decrease. For example, with regulatory compliance requiring reporting of transactional data, we believe this is the end of wash trading by exchanges and we'll get to compare real volume and demand. The bottom line is that the industry will slowly but surely gain back the public's trust that was once lost.

ICON has a strong brand within the crypto community. However, ICON, along with all reputable projects, still fall victim to the negative overall industry image. We believe ICON can benefit immensely from increased public confidence in the industry. Furthermore, we believe ICON can be distinguished singled out as a clear market leader with more trustworthy information.

More clarity needed

Although VASPs includes cryptocurrency issuers like ICON, the new crypto-specific bill appears to mainly target crypto exchanges for now. It is unclear what the exact compliance requirements are for existing projects like ICON or new projects yet to do an Initial Coin Offering (ICO).

We strongly believe ICON is in a favorable position because:

ICON Foundation is a registered entity under Swiss laws and complied with all KYC/AML standards
ICON network is fully decentralized and open-sourced
In the past 2.5 years, we faced ZERO legal issues and ICX is trading in all major exchange across various jurisdictions including the U.S. (the toughest)

On the other hand, we're deeply concerned with potential compliance costs for both ICON and our Dapps. We're afraid that high costs could negatively impact Dapp growth on our platform. We are continuously lobbying to ensure such costs do not impede innovation in South Korea.

Product spotlight

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