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Media CoverageCrypto Issues: The Scalability of DeFi and Digital Assets, and the Need for Domestic and International Regulation
Host: Anchor Choo Hye-jung Guest: Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm Q. First, can we start by discussing what DeFi is? DeFi (Decentralized Finance) Financial services provided through blockchain technology without the control of a central institution Q. What are some examples of DeFi? NFT marketplace 'OpenSea' The Luna-Terra DeFi system Q. What is the difference between Centralized Exchanges (CEX) and Decentralized Exchanges (DEX)? Q. What is the difference between claims and property rights? Claims provide specific rights and obligations between creditors and debtors Property rights involve ownership based on possession of a specific item In coin transactions, users deposit KRW or coins according to their contract, thereby holding claims "In case of exchange hacking or bankruptcy, the assets must be distributed equally" "Decentralized hardware wallets are unaffected by exchange bankruptcy" Q. Is the SEC pushing for DeFi regulation? The SEC is promoting DeFi regulation, and the U.S. Congress is preparing a bill on stablecoins Q. Is DeFi included in the scope of virtual asset service providers (VASPs)? DeFi is not included in the scope of VASPs under the Special Financial Information Act "There are no clear legal regulations for DeFi at this time" A U.S. SEC specialist commented, "Regulating DeFi may lead to the extinction of new technologies" There are internal disagreements within the U.S. SEC regarding regulation of decentralized exchanges Q. Is there a need for DeFi regulation? Investors are aware of the risks involved in DeFi investments but proceed due to high potential returns "Regulation is needed for hacking prevention and mandatory disclosure" Q. What are some examples of risks in DeFi investments? "High returns are often used as bait to attract investors to secure liquidity" "Depending on the product design, investors can adopt various strategies" "Investors may face losses if the price of the coin used in DeFi drops sharply" Q. What is the stance of regulatory agencies? "Regulatory agencies aim to protect investors" "Unfair behavior by coin operators can lead to delisting at the discretion of the exchange" Q. What would be the correct direction for DeFi regulation? "DeFi provides a new investment avenue that ensures individual freedom" Since DeFi lacks a supervisory body, investor protection is currently insufficient "Excessive regulation of the DeFi market should be avoided"
2023-04-21 NBN NEWS -
Media Coverage
1000% Profit? If You Know 'This', You Won't Be Fooled
As the prices of virtual assets like Bitcoin are once again on the rise, cases of victims falling prey to illegal fundraising schemes and pyramid schemes due to insufficient scrutiny are increasing. From January to March, the Financial Supervisory Service received 59 consultations and reports related to illegal fundraising disguised as virtual asset investments, a 47.5% increase compared to the same period last year. Financial authorities and the National Police Agency have warned investors to be cautious as these fraudulent methods continue to evolve. (omitted) Attorney Hyeonsu “Elliot” Jin of Decent Law Firm explained that there are five key things to know to prevent cryptocurrency fraud. The first is to emphasize "ID verification." Attorney Jin stated, "You should check the other party's ID, take a photo or record the information as evidence, and since IDs can be forged, it’s also a good idea to ask for additional documents such as a seal certificate." Using a "credit card" can also be a preventive measure. It is safer than coin transactions, which are difficult to trace, and wire transfers, which make recovering lost funds challenging. Additionally, visiting the company's address listed at the bottom of the virtual asset website, checking whether the terms and conditions are properly written, and confirming if the virtual asset is traded on domestic exchanges are also effective methods. Attorney Jin advised, "If you fall victim to fraud or suspect fraudulent activity, it is more efficient to consult a lawyer, gather evidence, and then proceed with legal actions such as filing a complaint or lawsuit, rather than reporting the issue immediately."
2023-04-16 Korea Economy TV -
Media Coverage
Legal Perspective on the GDAC Hacking Case
Host: Reporter Jang Se-jin Guest: Attorney Hong Puren, managing partner at Decent Law Firm Q. What are the details of the hacking incident involving the cryptocurrency exchange ‘GDAC’? Cryptocurrency exchange GDAC suffered a hacking incident with 20 billion KRW in losses, equivalent to 23% of its stored assets. Q. Are there any past examples of cryptocurrency exchange hacks? Mt. Gox in Japan went bankrupt after 850,000 Bitcoins were stolen. Q. What is Mt. Gox? Mt. Gox was initially a card trading platform and later transitioned to Bitcoin operations. Established in 2011, Mt. Gox saw Bitcoin priced at $1 per coin at the time. Mt. Gox was a platform that allowed the exchange of Bitcoin for cash. It handled over 70% of the world's Bitcoin transactions at its peak. Q. What happened during the Mt. Gox hacking incident? 850,000 Bitcoins were stolen from Mt. Gox in Japan. The Mt. Gox incident was a theft, not a hack. Concerns over the instability of Bitcoin and blockchain arose, causing a massive drop in Bitcoin's price. Q. Are there any inherent issues with Bitcoin or blockchain technology? "It is practically impossible to manipulate Bitcoin or blockchain." Q. If someone gains control of the majority of nodes, could they manipulate the system? "Anyone who holds power over Bitcoin is unlikely to do anything that would devalue it." Q. After Mt. Gox’s bankruptcy, was there any compensation for the losses? Mt. Gox began distributing Bitcoin compensation to its creditors. "There was controversy over the basis for Bitcoin’s market value used for compensation." Q. Are there other hacking cases involving cryptocurrency exchanges? Binance experienced a hack where 7,000 BTC were stolen. Q. Have there been domestic hacking incidents involving cryptocurrency exchanges? Both Upbit and Bithumb have had hacking incidents. "Thorough security measures are essential." Q. What are the common types of hacking targeting cryptocurrency exchanges? Cryptocurrency wallets manage "private keys vs. public keys." There have been cases where exchanges had their private keys stolen, leading to coin withdrawals. Q. How are private keys vs. public keys stored? Hot wallets (cryptocurrency wallets) are convenient for deposits and withdrawals but are "vulnerable in terms of security." Cold wallets store private keys on hardware like USB devices, providing better security. Q. Which is more secure, hot wallets or cold wallets? Generally, assets are stored in a combination of both hot and cold wallets for better security. Q. Is storing cryptocurrency in cold wallets safe? Most investors store their coins in exchange wallets. Q. In the event of a cryptocurrency exchange hack, is compensation for losses possible? If the exchange goes bankrupt, "it may be impossible to recover the coins." Q. What are the potential solutions for compensation in the event of a cryptocurrency exchange hack? In the case of a brokerage firm’s bankruptcy, stock investments are protected. Brokerage firms act as intermediaries, with stocks managed by the Korea Securities Depository. In contrast, if a cryptocurrency exchange goes bankrupt, "the coins are included in the exchange's assets." Q. Are coins included as part of the exchange's assets? Can losses be compensated? Creditors can initiate enforcement actions against the exchange. However, a lack of assets at the exchange can significantly increase the chance of losses. Legal separation, such as placing investor assets in trust, is necessary to protect investors. Q. What precautions should individuals take to prevent personal hacking? Personal hacks can occur through mobile phones. "Hacking incidents often happen after installing suspicious files." Q. Can installing suspicious files lead to hacking? Problems arise when hackers access usernames, passwords, or biometric information such as fingerprints. Q. What precautions should cryptocurrency exchanges take to prevent hacking? For long-term storage, it's advisable to store cryptocurrencies in personal wallets. "Cryptocurrency should be stored by the individual." "If convenience is a priority, distributed storage is recommended."
2023-04-13 NBN NEWS -
Media Coverage
Currency of the future?' A suspicious study group emerges.
As the virtual asset market becomes active again, illegal virtual asset companies are once again on the rise. Fraudulent coin investment recruitment groups, which had disappeared for some time, have reappeared on university campuses. This is a special report by reporter Lee Min-jae. (omitted) Jin Hyun-su, managing partner at Decent Law Firm: "Although key executives have been arrested, the business structure continues through other successors. (In Korea as well, there have been victims of A-coin), and recently, multi-level marketing (MLM) recruiters have resumed their activities and are conducting business." According to the National Police Agency's Economic Crime Investigation Unit, illegal multi-level marketing schemes related to virtual assets have been increasing every year. However, last year's losses were lower than the previous year, likely due to the drop in the price of virtual assets like Bitcoin at that time. Nevertheless, concerns are rising that with growing optimism about a bullish market for virtual assets, the amount of financial damage could increase again. Experts are warning that with the easing of social distancing measures, cases targeting students and the elderly may increase, urging caution.
2023-04-13 Korea Economy TV -
Media Coverage
Real-name account partnership of KakaoBank shaken by increasing legal risks.
PicaCoin, which received 3 billion KRW in listing fees, and FuryEverCoin, involved in the Gangnam murder case, are among the coins listed on Coinone that have raised concerns. In response, KakaoBank, which provided real-name accounts for Coinone, has stated that depending on the outcome of the prosecution's investigation, they may terminate their contract, drawing attention to the result. On the 12th, according to NBN TV’s investigation, KakaoBank stated, “We have been faithfully fulfilling our anti-money laundering obligations in accordance with the Act on Reporting and Using Specified Financial Transaction Information (Special Act).” Additionally, they mentioned, “We cannot disclose the specific details of the real-name account contract with Coinone, but if criminal activity related to coins listed on Coinone, such as FuryEverCoin and PicaCoin, is uncovered through the ongoing investigation by the prosecution and police, the real-name account contract may be terminated.” (omitted) Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm, commented, “According to Article 7, Paragraph 3, Subparagraph 2 of the Special Financial Information Act, a contract with a bank is essential to operate a KRW exchange. It is likely that the contract includes a clause allowing termination if criminal activity or other legal issues arise. Depending on the results of the prosecution's investigation, if Coinone loses its contract with KakaoBank and fails to secure another bank, it could lose its status as a KRW exchange.”
2023-04-12 NBN NEWS -
Media Coverage
Repeated cryptocurrency exchange hacks and unclear compensation for damages lead to a decline in trust.
Recently, the South Korean cryptocurrency exchange GDAC was hacked, resulting in a loss of approximately 20 billion KRW in cryptocurrencies, which is expected to deal a significant blow to the domestic virtual asset market. Experts point out that smaller cryptocurrency exchanges are likely to struggle to attract investment to cover losses due to a decline in trust following such incidents. It is also expected that compensation for consumer damages caused by hacking could take a long time. (omitted) Pureun “Ian” Hong, managing partner at Decent Law Firm, which specializes in virtual assets, stated, “The fact that the exchange’s measures to prevent hacking were insufficient falls under internal exchange information, making it very difficult to prove. Furthermore, for financial authorities to step in for damage relief, the decision would depend on the impact it has on the financial market, which is likely to be perceived as relatively minor.”
2023-04-11 biz.chosun