How South Korean Government Prevents Officials from Insider Crypto Trading

No Applicable Law Currently

The issue of insider trading using the knowledge of the government’s cryptocurrency regulations became prominent last month when an FSS employee was accused of crypto insider trading. The FSS has an active role in creating crypto regulations as well as inspecting banks for crypto-related money laundering measures.

The employee invested about 13 million won on July 3 of last year and sold more than half of his holdings on December 11, Chosun described. Then, on December 13, the government announced a set of strict regulations, including a ban on crypto trading for minors and foreigners.

Guilty or not, there is no law to punish government officials for insider trading of cryptocurrencies. While employees are prohibited from stock trading using insider knowledge, a senior FSS official was quoted by Edaily explaining:

Currently, there are no provisions in the regulation on virtual currency.

New Code of Conduct Could Help

The rules applicable to stocks do not apply to cryptocurrencies since they are currently not recognized as financial assets in Korea. To prevent future insider trading, Korean prime minister Lee Nak-yeon ordered the creation of a new Code of Conduct to address crypto trading by public officials.

The Korean Anti-Corruption & Civil Rights Commission issued the “Code of Conduct Guide to Cryptocurrency” to the government and public agencies last week. It adds cryptocurrency to Article 12 of the Civil Servant Code of Conduct which, according to Tokenpost, states that:

Public officials shall not use the information learned during their duties to assist in trading or investing in property related to securities, real estate, etc., or providing such information to others to help them trade or invest.

However, the FSS Did Not Get the Memo

The FSS, however, is not bound by the new Code of Conduct. According to Edaily, the document was not even sent to the FSS. “This guidance document was sent to the central administrative agency, metropolitan area, basic local autonomous body, city and provincial office of education,” an FSS official detailed. A senior official of the FSS Inspectorate confirmed to the publication, “We did not receive any letters of interest.”

The news outlet explained that this is due to the FSS being under the supervision of the Financial Services Commission (FSC) and the Securities and Futures Commission under the current law.

Leading Australian Banks Allow Customers to Purchase Cryptocurrencies

Three of Australia’s ‘big four’ banks have issued comments regarding their respective policy positions with regards to their customers’ ability to purchase cryptocurrency using accounts issued by said banks. The statements come weeks after reports surfaced detailing an apparent banking embargo on the part of Australian banks targeting cryptocurrency businesses.

ANZ and Westpac Allow Customers to Purchase Cryptocurrency for Now

According to the Australian Broadcasting Corporation, a spokesperson representing Australia and New Zealand Banking Group (ANZ) stated that the bank “does not prohibit customers buying digital or cryptocurrencies, or accepting them as a form of payment.” ANZ’s spokesperson added that the bank “monitors transactions for unusual behavior to protect against potential fraud and in line with our regulatory responsibilities.”

ANZ however, does not provide banking services to “businesses that operate as issuers, dealers or exchanges of digital or cryptocurrency,” with the spokesperson stating that “these businesses are currently unregulated and therefore not within ANZ policy”.

Westpac has indicated a permissive stance with regards to its customers’ ability to purchase virtual currencies, with a spokeswoman stating “We currently have no restrictions on credit card use to purchase cryptocurrency.” However, the representative refused to comment on whether the bank is considering introducing a prohibitive policy in future like those currently enforced by Westpac’s U.K. and U.S. based counterparts.

NAB and CBA Restrict Customer Access to Cryptocurrencies

National Bank of Australia (NAB) has taken a more cautionary tone, with a representative stating that “[the Australian Securities and Investments Commission] advises that, as most of the virtual currency exchange platforms are generally not regulated, customers may not be protected or have any legal recourse if the platform fails or is hacked.” As such, NAB stated: “To reduce the risk for our customers, and to help protect their money, some card transactions may not be processed,” adding “We take the protection of our customers’ information and accounts extremely seriously.”

The Commonwealth Bank of Australia (CBA) declined to respond to the Australian Broadcasting Corporation’s request for comment, however anecdotal reports have long indicated that CBA has prevented its customers from conducting wire transfers to major cryptocurrency exchanges.

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Russia Drafts Bill to Create Offshore Companies to Trade Cryptocurrencies

The Russian Ministry of Finance is drafting a bill to allow the creation of offshore companies to trade cryptocurrencies. This follows the bill which the ministry recently published on the legal framework for cryptocurrencies.

Crypto Trading Offshore

“The Ministry of Finance proposed to create offshore companies in Russia for trading with cryptocurrency,” Ria Novosti reported. Deputy Finance Minister Alexei Moiseev told journalists that his ministry is “considering the possibility of implementing organized trades of cryptocurrencies on the Russky and Oktyabrsky islands,” according to Tass.

Oktyabrsky is a river island in the European Kaliningrad Oblast. Russky Island is part of the city of Vladivostok, off the Pacific coast near Japan. In November of last year, a Hong Kong company announced that it planned to set up a crypto mining farm on Russky Island.

Referring to a recently published bill entitled “On Digital Financial Assets,” Moiseev said the two islands are being considered in the bill. He elaborated that the opportunity to trade cryptocurrencies on Russky Island was “discussed with the Ministry of the Far East,” Ria Novosti described.

Moiseev believes that “the exchange of cryptocurrency for rubles and other assets can be resolved in separate territories,” Tass noted and quoted him explaining:

Maybe it will not be on the common territory, but within the framework of special territories like Vladivostok Free Port, [where] there is already an offshore element, and now a bill is being prepared for the Russky and Oktyabrsky Islands, where there will be an even more special regime.

Differing Opinions

The Ministry of Finance and the Bank of Russia still have not reached an agreement on the possibility of exchanging cryptocurrency for rubles and other assets.

Russian Presidential Adviser on Internet Development, Herman Klimenko, has “criticized the idea of the Ministry of Finance to create offshore companies in Russia to trade cryptocurrencies,” Tass also reported. According to him, from a technical point of view, there is no difference where the trading of cryptocurrencies is carried out.

Klimenko elaborated, “This is about the same as legalizing mining in a certain territory. You cannot prove that it is conducted on certain sites or on certain equipment.” In addition, he “believes that the organization of offshore companies has no economic basis and will not lead to the creation of new jobs.” He was further quoted by the publication:

"When we do offshore fishing in Vladivostok, it’s understandable, there are fish there. If on the Russian island there were the best quality of Internet access and the fastest connection to the whole world, we would say that, for trading in cryptocurrency, this is the most important factor. Then it would be understandable, and so [as it is] there is no point."

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