Vietnam Cracks Down on Unlicensed Crypto Trading

Retail cryptocurrency users in Vietnam will be subject to substantial fines of up to $1,900 if they conduct trades on unlicensed foreign platforms such as Binance, OKX, and Bybit, instead of using locally licensed exchanges.

However, a significant challenge looms: the Vietnamese Finance Ministry has yet to grant a single exchange license for its new regulated digital asset market, which is scheduled to commence operations on September 1. Despite this, five exchanges have received approval in principle.

The penalties are even steeper for other violations. Domestic investors who trade cryptocurrencies that are designated for foreign investors only could face fines as high as $3,800. For crypto companies, the fines can reach up to $7,600 for providing or advertising services without a license, failing to conduct proper customer identification, or mishandling crypto account data.

Malaysian Controversy Surrounds "Network School"

In Malaysia, Balaji Srinivasan’s utopian Network School, located in Forest City, is embroiled in controversy amid allegations that it has been hosting Israeli citizens who entered the country using second passports. The accusations originated from an activist organization, Malaysia Protest 4 Palestine, which claims the school has turned into a "gathering place for Israeli entrepreneurs."

This situation is particularly sensitive because Malaysia does not have any diplomatic relations with Israel and prohibits Israeli citizens from entering the country. While dual nationals holding Israeli passports are currently permitted, this controversy suggests that this legal loophole may soon be addressed. The incident, involving prominent figures like Vitalik Buterin and Bryan Johnson who have been associated with the school, gained international attention after Srinivasan threatened to withdraw the Network School and its substantial investments from Malaysia.

In response, the Malaysian Immigration Department conducted an investigation and reported that all 266 foreigners in question possess valid documentation. Meanwhile, the Johor state government is proceeding with its own investigation to verify compliance with regulations concerning business licenses, building usage, and commercial activities. The dispute is ironic, given that the Network School is founded on the idea of online network states, which theoretically aim to transcend such real-world political conflicts.

Japan Elevates Crypto to Financial Asset Status

The Japanese Parliament has approved amendments to the Financial Instruments and Exchange Act, a move that officially categorizes cryptocurrencies as financial assets. This regulatory shift transfers oversight of cryptocurrencies from the Payment Services Act and introduces a mix of tax advantages alongside stricter penalties and regulations appropriate for crypto's new standing alongside traditional financial assets.

Under the new rules, unlicensed crypto platforms could be fined 10 million yen or their operators could face 10 years in prison. A new prohibition on insider trading for cryptocurrencies has also been established, with enforcement to be carried out by the Securities and Exchange Surveillance Commission.

On a positive note for investors, the current crypto tax rates, which can be as high as 55%, are set to be reduced to around 20%. The new tax code will also include a three-year provision to carry forward any losses, which strategically aligns with the typical four-year cycle of a bull run. However, these new tax regulations will not become effective until 2028.

Sweeping Crypto Developments in South Korea

South Korea has put forward a proposal to modernize its national asset management framework by including cryptocurrencies and intellectual property within the definition of "national assets." The Ministry of Economy and Finance declared it is overhauling the 1950 State Property Act into a new National Asset Basic Act. This change would make it the first sovereign asset management statute in the world to officially incorporate cryptocurrency.

The current law was designed for an economy primarily centered on real estate and no longer represents the diverse range of assets held by the government. The updated framework will also pivot from merely managing assets to actively generating value from them, hinting at the possibility of the Korean government participating in activities like yield farming on platforms such as Aave in the future.

Further updates from across South Korea include:

• The Financial Supervisory Service (FSS) has initiated sanction procedures against Dunamu, the operator of the Upbit exchange, following a $30 million hack in November. The FSS has been investigating the incident for potential violations of the Virtual Asset User Protection Act, although the existing law lacks specific sanctions for hacks or IT failures.
• This regulatory gap is anticipated to be closed by the forthcoming Digital Asset Basic Act, as legislators have resumed discussions on the new legislation after a four-month pause.
• South Korea's Financial Services Commission is expanding its victim compensation programs to include crypto-related scams.
• Since early June, the weekly trading volume on Korea’s five largest exchanges has fallen by more than half, dropping to just 8 trillion won.
• The Bank of Korea plans to broaden its Project Hangang central bank digital currency (CBDC) pilot to include nine banks. This second phase, starting in September, will also introduce biometric payments and peer-to-peer transfers.
• Officials from the National Tax Service have suggested legal amendments to create clear protocols for seizing self-hosted crypto wallets during investigations.
• It was discovered that Consensys had inadvertently employed a North Korean developer who was granted access to Metamask's code, though the company stated an investigation found no security breaches.

Other News from Around Asia

According to a report from Wu Blockchain, Coinbase has started allowing user verification for individuals based exclusively in China. While Chinese users previously had to provide a Hong Kong address, they can now reportedly complete verification on the platform using only a Chinese ID card and a Chinese address. Despite this, China is still absent from Coinbase’s list of supported countries.

• In Hong Kong, the first crypto-native tokenized fund from Baillie Gifford has received approval, enabling professional investors to gain direct ownership of assets recorded on the blockchain.
• Bybit is set to introduce a regulated platform in Indonesia after acquiring the local NOBI exchange. To manage its operations in the country, Bybit will retain NOBI’s existing senior management team for the new Bybit Indonesia entity.