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Asian shares steadied on Monday as investors caught their breath following another week of escalating U.S.-China trade tensions, with sentiment turning brighter after the United States said it would lift tariffs in North America. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.6%, reflecting modest gains in markets across the region after the broad index finished at its lowest since Jan. 24 on Friday, down 3% for the week. Australian shares underpinned the market’s firmer mood, jumping 1.7% after the center-right Liberal National Coalition pulled off a shock win in federal elections, beating the left-wing Labor Party.
U.S. stock futures and Asian shares fell on Monday on growing anxiety over whether the United States and China will be able to salvage a trade deal, after Washington sharply hiked tariffs and Beijing vowed to retaliate. The United States and China appeared at a deadlock over trade negotiations on Sunday as Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any “bitter fruit” that harmed its interests.
Asian shares rebounded on Monday after strong U.S. first-quarter economic growth boosted the S&P 500 index to a record high, and the recovery was also supported by data showing profits at Chinese industrial firms grew for the first time in four months. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.38 percent, rebounding from its biggest weekly drop in more than a month last week. Japan’s financial markets are closed for a long national holiday this week, but Nikkei 225 futures in Singapore were 0.85 percent higher.
The Financial Stability Board has detailed how its member countries regulate crypto assets, who the regulators are, and the scope of their oversight. Most countries have more than one government body monitoring and regulating different aspects of crypto activities. Among the board’s Asian member countries, India is the only one with no legal mandate to directly regulate crypto assets.
Three regulators — the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and the Ministry of Finance — regularly attend the Financial Stability Board (FSB) meetings and G20 summits. The FSB is an international body that monitors and makes recommendations about the global financial system. It has listed only the RBI, the country’s central bank, as the regulator of the Indian crypto space, clarifying in a report published Friday:
RBI does not have a legal mandate to directly regulate crypto-assets. RBI’s current mandate permits it to assess financial institutions’ exposure to crypto-assets and supervise their operations.
Within its mandate, the central bank has prohibited financial institutions from dealing in “or providing services for facilitating any person or entity in dealing with or settling” cryptocurrencies, the FSB detailed. The three aforementioned regulators are part of the panel headed by Subhash Chandra Garg, Secretary of the Department of Economic Affairs, tasked with drafting the country’s crypto regulation. According to the government, this panel is in its final stages of deliberations. India’s crypto regulation was expected to be presented to the country’s supreme court on March 29 but the court adjourned without addressing the matter until July.
At the opposite end of the crypto regulatory spectrum, Japan legalized cryptocurrency as a means of payment back in April 2017 under the amended Payment Services Act.
The main regulator is the Financial Services Agency (FSA) which supervises and conducts oversight of crypto exchange service providers. Crypto exchanges are required to register with the agency. There are currently 19 registered exchanges with over 140 companies interested in entering the market, the regulator has shared with news.Bitcoin.com. The FSA also cooperates with a self-regulatory organization for added oversight. Additionally, the agency engages in international policy discussions on crypto assets and is currently discussing policies on initial coin offerings (ICOs).
Besides the FSA, two other government bodies are involved in the regulation of the Japanese crypto industry: the central bank and the Ministry of Finance.
The Bank of Japan established a fintech center within its Payment and Settlement Systems Department in 2016. The center conducts research on new technologies including cryptocurrency and how they could change existing financial services and structures. The Ministry of Finance is responsible for supervising and legislating crypto assets’ trade under the Foreign Exchange and Foreign Trade Act including the planning and execution of crypto-related taxation.
There are three regulators for crypto activities in South Korea, with the main regulator being the Financial Services Commission (FSC). The Financial Stability Board describes:
The FSC promotes information exchanges and cooperation with international organisations, especially in regard to virtual currency, and is responsible for analysing trends and establishing policies on the digital currency market and for integrating and coordinating policies and major plans of anti-money laundering system related to virtual currency.
Meanwhile, the Financial Supervisory Service (FSS) is responsible for the oversight, market integrity, general anti-fraud and consumer protection of crypto-related activities.
The FSS and the FSC worked together to produce the country’s cryptocurrency measures at the end of 2017 and additional guidelines in January last year. However, they have yet to introduce any follow-up measures. Meanwhile, ICOs are banned from being launched domestically. At least six bills have been submitted to the National Assembly but none have advanced, the FSC previously told news.Bitcoin.com.
The two regulators implemented the real-name system in January last year with the aim to convert all anonymous crypto accounts into real-name-verified ones. In addition, the Korea Financial Intelligence Unit issued reporting guidelines for banks to prevent money laundering via crypto transactions. The country is also working on the taxation of crypto assets.
The last regulator listed for South Korea by the FSB is the central bank. The Bank of Korea monitors and researches the development of crypto assets and their impacts on the economy and financial stability, including the implications of using cryptocurrencies as payment instruments.
Despite the country’s early history in the space, the only crypto regulator listed for Singapore is the central bank, the Monetary Authority of Singapore (MAS), which performs many regulatory functions.
Firstly, it monitors “the prudential exposures of banks, insurance companies and asset managers to crypto-assets.” It also “regulates activities and institutions conducting activities involving cryptoassets if these are capital markets products” under the Securities and Futures Act, the FSB described. Moreover, besides monitoring “the financial stability risks posed by crypto-assets,” the central bank has “extended its surveillance and market intelligence gathering to include crypto-assets.”
The MAS additionally regulates crypto businesses as part of its regulation of payment systems, stored value facilities, remittance businesses and money-changers. The FSB explained that the upcoming Payment Services Act will expand the “MAS’ regulatory reach to cover additional payment activities, including digital payment token services.” It will also set out “regulations for AML/CFT to mitigate risks posed by entities … which conduct crypto-related activities.”
Another member of the FSB, China became a hotbed of crypto activity in bitcoin’s early life but then began heavy oversight of the crypto industry, banning crypto exchanges outright in 2017. In addition to the People’s Bank of China (PBOC), the country’s central bank, five other government bodies regulate crypto-related activities in China.
The Cyberspace Administration of China monitors online crypto-related activities and rectifies any problems found. The Ministry of Industry and Information Technology prohibits and shuts down illegal crypto-related websites, the FSB noted. Another regulator is the Ministry of Public Security which prohibits crypto activities that are “suspected of illegal criminal activities including illegal fund-raising, fraud and pyramid-schemes.”
Meanwhile, China’s Banking and Insurance Regulatory Commission “is closely following the development of crypto-assets in China and its potential risk to the banking and insurance system,” the board emphasized. Lastly, the country’s Securities Regulatory Commission, which combats the illegal issuance of securities, “is now strengthening research on the issues of crypto-assets related securities.”
What do you think of how these Asian countries regulate cryptocurrency? Let us know in the comments section below.
Images courtesy of Shutterstock, the RBI, the Bank of Japan, the Bank of Korea, the MAS, and the PBOC.
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The U.N. Security Council has heard that North Korea uses cyberattacks and blockchain technology to evade economic sanctions and obtain foreign currency. Through hacking, the reclusive Republic has raked in around $ 670 million in foreign exchange and cryptocurrency, a panel of experts told the Security Council’s North Korea sanctions committee, ahead of the council’s annual report.
Crypto Exchanges and Financial Institutions Hacked
Pyongyang is reeling from a slew of economic sanctions imposed by the U.N. at the request of the United States over its nuclear and missile programs. The embargo has crippled North Korea’s coal exports, a major foreign exchange earner.
According to the Nikkei Asian Review, which claims to have obtained the panel’s report, the North cyberattacked overseas financial companies from 2015 to 2018, and used blockchain technology to cover its tracks.
Between January 2017 and September 2018, the Democratic People’s Republic of Korea successfully hacked cryptocurrency exchanges in Asia at least five times, with losses totaling $ 571 million, the panel estimated. The attacks are understood to have been carried out by a specialized military unit and are now a crucial part of North Korean government policy, the article detailed.
The panel did not name the affected trading platforms but Japanese exchange Coincheck reported in January 2018 the theft of $ 530 million worth of the NEM cryptocurrency during an attack. Another cyberattack in September last year on Zaif, a crypto exchange operating out of Japan, left a financial hole of $ 60 million.
In South Korea, more than 10 million users of e-commerce platform Interpark had their personal information stolen in cyberattacks. Hackers demanded a ransom of $ 2.7 million in exchange for returning the stolen data. The South Korean government believes the attacks were carried out by the North and the U.N. expert panel is convinced they were meant to obtain foreign currency.
Evading Economic Sanctions
In its report, which is due to be submitted formally within days, the U.N. panel explained:
[Cryptocurrencies] provide the Democratic People’s Republic of Korea with more ways to evade sanctions, given that they are harder to trace, can be laundered many times and are independent from government regulation.
The experts pointed out that the North Korean government created a pool of illicit funds from hacking since 2016. It recommended that state parties “enhance their ability to facilitate robust information exchange on the cyberattacks by North Korea with other governments and with their own financial institutions,” to detect and prevent the North from circumventing the sanctions.
North Korea also stands accused of using the anonymity of virtual currencies to get around economic sanctions, the Nikkei Asian Review reported. For example, Marine Chain, a Hong Kong-based company, which buys and sells ships using blockchain, is believed to have supplied North Korea with cryptocurrency until it was eventually shut down in September 2018.
What are your thoughts on North Korean cyberattacks on cryptocurrency exchanges? Let us know in the comments section below.
Images courtesy of Shutterstock and Nikkei Asian Review.
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Governments in emerging markets have typically paid more to borrow in their local currencies than in dollars. Last year, the picture reversed, but Asian domestic yields are at best even with hard-currency yields.
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