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South Korean Blockchain Advocacy Group Calls for Tax Laws Postponement 

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However, while adoption appears to be on the rise in South Korea, industry experts have also urged the government to create an encouraging environment or players. 

A Short Implementation Window 

Most notably, industry experts have called on the government to nix its proposed crypto tax plan for now. Earlier this week, local news source News1 Korea reported that the Korea Blockchain Association (KBA), a blockchain and crypto advocacy group, requested that the government postpone implementing its crypto tax framework for 18 months.

The South Korean government’s proposed tax plan has been a particular sticking point for many in the country’s crypto space. The plan was published by the Ministry of Finance and Economy in July, with the Ministry stipulating that taxation for digital assets is a necessity as these assets continue to penetrate the traditional financial system. 

Under the new framework, the Ministry plans to categorize all gains from digital assets and intangible assets as taxable income. However, any income below 2.5 million won (about $2,000) per year falls below the Ministry’s minimum threshold and will be tax-exempt. All income above the minimum threshold will be subject to a 20 percent tax rate, on par with the tax rates for most other capital gains and taxable income in the country.

The tax laws apply to local and foreign transactions that trade digital assets via South Korean exchanges.  Under the new rules, exchanges will be responsible for all tax deductions and paying the monies to the Korean customs office. 

While the laws should come into effect on October 1, 2021, the BKA asks for a delay until January 1, 2023. As News1 Korea explained, the window for adjustment is too short, and exchanges won’t effectively adapt to the new tax regime. As the advocacy group explained, exchanges will be allowed to report on trades using the soon-to-be-outdated tax policy until the end of September. A 24-hour period will be too short for them to make the necessary changes.

Ineffective Reporting 

Oh Gap-soo, the BKA’s Chairman, also explained that a suspension of the tax code would be necessary since it is the first time the government is getting involved in digital asset taxation. He pointed out the possibility of regulators not accepting crypto firms’ reports – a possibility that could lead to sub-optimal operation

“The industry is having a great deal of difficulty in preparing for taxation because it is not equipped with a tax infrastructure in a situation where it is uncertain whether or not the business will continue ahead of the enforcement of the Special Payment Law.”

Besides the taxation laws, South Korean exchanges are also fighting back against the government’s mandatory identity verification rules. As Digital Today reported last week, the new regulations require exchanges to collect several details from their customers, including and especially social security numbers. However, that is a direct contradiction to the country’s Personal Information Protection Act.

South Korean Blockchain Advocacy Group Calls for Tax Laws Postponement 

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Jay Kurahashi-Sofue from Ava Labs Claims Blockchain Project Avalanche Is Achieving Decentralization at an “Unprecedented Pace”

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Jay Kurahashi-Sofue, VP of Marketing at Ava Labs, an organization focused on building Avalanche so that the platform can empower people to create “an open, simple, and democratic internet of finance,” has noted that leading up to the official launch of the Avalanche mainnet, it was clear that Ava Labs had to convey its role in developing decentralized software solutions.

Jay confirmed that, in June 2020, the Ava Labs team announced a consolidation of its brand identity to make the necessary connections (and distinctions) between Ava Labs, Avalanche, and the Avalanche (AVAX) token. He explained that this effort was meant to be part of a long-term approach to establishing Avalanche as an initiative that’s “driven by and for its community.”

Jay further noted that Ava Labs has served as the launchpad for the Avalanche project. He also mentioned that Ava Labs plans to continue playing a role in supporting the blockchain-based network’s development. However, they also “aspire to lessen [their] influence over the platform’s direction as Avalanche governance begins to take hold,” Jay claims. He argues that this is “the natural progression of all great decentralized networks.”

He added:

“The successful completion of the Avalanche (AVAX) token sale and the launch of Avalanche’s mainnet marked the first step in testing our brand consolidation efforts; Avalanche’s brand mark exemplifies the platform as a whole, while the brand mark for AVAX symbolizes a small piece of the Avalanche platform.”

He continued:

“With mainnet launch on September 21, 2020, Avalanche is achieving decentralization at an unprecedented pace–over 500 full, block-producing validator nodes within the first week and rapidly growing community across all channels (to date, the Avalanche Twitter has grown 112% since the token sale on July 15).” 

It’s worth noting that many blockchain or distributed ledger technology (DLT) projects claim that they’re decentralized, however, this might not necessarily be the case. For example, there have been many cases where these so-called decentralized platforms were hacked and the founding members or developers had to step in to bring things back to normal. In many cases, this has involved shutting down the network completely until the issue is resolved. A truly decentralized system would be almost impossible to shut down so easily.

Despite these issues, Jay confirmed that Ava Labs is focused on making it easier to launch DeFi apps by leveraging blockchain or DLT. The organization aims to help individuals and businesses with creating an open, democratic internet of finance.

As noted by the organization’s team members:

“Ava Labs makes it simple to launch finance applications … with highly scalable and efficient networks, customizable public and private blockchains, the capability to create any digital asset, and more.”

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CipherTrace Points Out Issues With Most Exchanges’ KYC Policies

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One of the many fronts from which cryptocurrency detractors have attacked the industry has been with fraud prevention.

While there are laws concerning identity verification and other measures in place, exchanges and other asset custodians haven’t done the best job of enforcing them. However, a new report is showing just how damaging the situation is.

No Progress Despite Regulations

Earlier this week, blockchain analytics firm CipherTrace published a study confirming that a vast majority of cryptocurrency exchanges worldwide lack a robust identity verification policy. The report, which summarized a survey of over 800 exchanges, found that 56 percent of them were still not up to the Know-Your-Customer (KYC) system requirements that regulators had implemented.

As the study found, 56 percent of all surveyed exchanges were significantly inadequate. Breaking things down, it found that the highest concentration of faltering exchanges is in Europe, with about 60 percent of Virtual Asset Service Providers on the continent having deficient KYC policies.

The United States, the United Kingdom, and Russia are the three countries with the highest number of such exchanges. Singapore also ranked high on the list.

In part, CipherTrace noted that many exchanges didn’t even mention their countries of incorporation anywhere on their websites. This exclusion implies that they could be hiding their jurisdictions to avoid compliance with the right KYC and Anti-Money Laundering (AML) policies. Of these exchanges, 85 percent have inadequate KYC frameworks.

CipherTrace also pointed out that Seychelles could be a potential hub for money laundering and other financial crimes, as the island nation has become a magnet for faltering exchanges. Per the report, 70 percent of exchanges registered there didn’t have robust KYC frameworks.

The study also looked into decentralized exchanges, finding that 81 percent of the 21 exchanges it surveyed had either weak KYC policies or none at all. Weak identity verification has always been a problem for crypto exchanges. Last year, when the Financial Action Task Force (FATF) published its Travel Rule, many pushed back at the AML enforcer for forcing exchanges to collect information. A similar reaction was witnessed following the implementation of the Fifth Anti-Money Laundering Directive (AMDLD5) from the European Union.

Binance’s Weak KYC Woes

Amid all of this pushback, money laundering in the crypto space has remained prominent in 2020. Some top exchanges have also found themselves in hot water.

Last month, the Japanese exchange Fisco sued Binance in the Northern California District Court, accusing the company of enabling hackers’ money laundering efforts due to its weak security policies. The suit originates from a security breach last year, where hackers stole 4.5 billion yen (about $40.09 million at the time) from its hot wallets and a further 2.2 billion yen ($19.61 million) in the company assets.

In its filing, Fiscco explained that its hackers had sent the stolen money to a Binance address. The exchange added that due to Binance’s weak KYC policies, they could cash out and launder their funds effortlessly.

Binance’s policy allows users to open accounts and make transactions less than 2 BTC. Fisco pointed this out, adding that the hackers could capitalize on it and other weaknesses.

CipherTrace Points Out Issues With Most Exchanges’ KYC Policies

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