Embedding the Special Law (Revised Act on Reporting and Using Specified Financial Transaction Information) within virtual assets, including redemption of hacking and losses.
Tags: Special Law, Compliance, Gritfin, Cryptocurrency, Aml

Embedding the Special Law (Revised Act on Reporting and Using Specified Financial Transaction Information) within virtual assets, including redemption of hacking and losses. GRITfin Follow Jun 17 · 6 min read

Author: Ara Cho, IT Chosun | Date: June 17th, 2021

# Company A was robbed of Bitcoin worth more than KRW 3 Billion due to a hacking incident that occurred on exchange B. But company A does not have to worry too much. This is because they can report the damages to party C, which is a relief company for virtual assets by using Bitcoin’s certificate of ownership. Party C tracks the path of the stolen Bitcoin, stops trading, and returns the stolen Bitcoin to the original owner, company A.

# Exchange D has significantly strengthened screening for listing virtual assets. Only businesses that have established Anti-Money Laundering (AML) solutions can be traded on their platforms. In addition, it guided listed token companies to establish KYC (Customer Knowledge System) and AML for their own virtual assets. As a result, listed token companies and investors (individuals or institutions) are strengthening their own security and complying with regulations.

The aforementioned example shows an ideal virtual asset trading ecosystem that has been virtually decorated. It is a system that allows all participants in the additional asset market to voluntarily secure transparency and stability to reduce the risk of virtual asset financial crimes and accidents such as hacking, fraud, theft, and mismanagement of assets. In other words, each participant is a compliance agency. Based on this, supervisory authorities and financial institutions can significantly reduce their management and supervision duties and responsibilities. It can also improve government and market awareness of virtual asset transactions.

Establishing a consultative body to create an ecosystem for maximizing transaction stability.

The problem is that such an ecosystem has not yet been realized. This is why major countries around the world are agonizing over institutionalization of the virtual asset market. As a result, a consultative body (alliance) to technically implement a sound virtual asset ecosystem has been established for the first time in South Korea, drawing keen attention from the industry.

Alliance was led by Choi Byung-kyu, vice president of NSHC, a leading security solution company in South Korea. In addition, Uppsala Security, a virtual asset tracking solution company and Han Seo-hee and Choi Young-no, lawyers at Barun, a law firm, are in charge of legal advice for the recovery of virtual assets and the rescue process of victims. In addition, operators in various fields such as DID, Custody, KYC and AML solutions, virtual asset exchanges, and token economy development companies expressed their intention to participate. They are actively discussing joint projects such as developing technologies and participating in various related platforms.

The establishment of an alliance has been a decisive opportunity for the enforcement of the “Specific Financial Act (hereinafter referred to as the Special Act)” that imposes AML obligations on virtual asset operators. While large-scale restructuring is expected in the process of repairing business reports, the market is shrinking significantly as the government announces a massive crackdown on illegal activities of virtual asset operators.

The Alliance has a consensus to minimize the fundamental problems of virtual asset transactions, such as financial crime and regulatory uncertainty, while maximizing the advantages of token economy to revitalize the market.

Vice President Choi Byung-kyu said, “As I analyzed the security data, I found a lot of recent crimes using virtual assets,” adding, “The responsibility lies with virtual asset investors, but it is too difficult for individuals to solve security issues. We lack damage recovery technology and have no means yet to share damage information among market participants,” he said. “To solve this problem, we have developed a security and guarantee solution optimized for blockchain technology-based ecosystems.”

“We tried to save the victims through the Center for Virtual Asset Damage Response (CIRC), but it is not easy to recover the damage due to the irony of decentralization,” said Gu Min-woo, head of the South Korean branch of Uppsala Security, who has been working with NSHC since last year.

Key to preemptive regulatory response, guaranteeing virtual asset payment and strengthening self-responsibility

Key points of ecosystem activities are preemptive regulatory response, trust and payment guarantee for virtual assets, and strengthen self-responsibility. The rough framework is as follows.

A company is going to entrust Bitcoin to party E, which is an entrusted business through platform D. In the process, D filters who A is and whether he/she has a history of Money Laundering or Terrorist Financing. Here, some of the requirements for implementing the Special Law will be resolved. If there is no sign of abnormality, D will have A issue a certificate stating that “the Bitcoin belongs to A” through C, a DID company. The certificate is called “MetaReg”. It is a kind of Bitcoin guarantee check. If a financial accident occurs, A can issue a meta-leg, a certificate, and get the Bitcoin back.

Vice President Choi Byung-kyu will be in charge of developing platform technologies. NSHC has been providing cybercrime prevention solutions based on crime databases related to virtual assets on the dark web and deep web. Vice President Choi Byung-kyu plans to utilize NSHC’s technologies such as Threat Information Analysis Services on the Dark Web, Deep Web (Darktracer), Hacking Incident Analysis Team (RedAlert Analysis Team), Mobile Security Solutions (DxShield), Worldwide Hacking Group Analysis Platform (ThreatRecon) will be applied. Based on this, they are responsible for issuing virtual asset guarantee check such as a bank.

Uppsala Security plays the role of damage assessor. They are responsible for tracking and analyzing virtual asset victims’ money and drawing cooperation from judicial institutions. The main strength is virtual asset fund tracking technology and the rescue of virtual asset financial crimes victims. NSHC’s data will be linked to the virtual asset financial crime database and used for further related analysis.

Aiming Virtual Asset Utilization Comprehensive Financial Platform. Collaboration with a variety of companies is essential

The platform that Alliance will work on is in the final stages of R&D. Its goal is to release its service as early as October.

However, there are several mountains to cross to revitalize the ecosystem. The biggest challenge is to establish a token economy that allows participants to participate voluntarily to establish a compensation system, while securing a large number of platform participants based on high reliability. As anonymity and decentralization which are advantages of virtual assets, are weakened, demand from institutional investors who value safety in the early stages of service is expected to be the key.

Vice President Choi Byung-kyu said, “We will develop into a comprehensive financial platform that can be compensated even if an incident occurs and can utilize virtual assets without worrying about accidents. Cooperation with various companies with technical responsibility and authority is the most important factor.”

Uppsala Security will focus on upgrading the technology that combines traditional security technologies with virtual asset tracking systems. The company plans to develop a tracking system suitable for new types of crimes such as Smart Contract Vulnerability Attack, Dumping & Run or Flash loan Attacks caused by Oracle issues.

“The responsibility for the damage from financial crimes on virtual assets is going back to the private sector,” Koo said.

We hope that efforts, regulations on industrial development, and corporate efforts to protect users will be harmonized to become a society without “innocent victims.”

“I realized the need for compensation and recovery by participating in the victim relief program,” lawyer Han Seo-hee said. “I hope the virtual asset market will be healthy based on the advanced technology of NSHC and Uppsala Security.”



[KR] Original Article : http://it.chosun.com/site/data/html_dir/2021/06/16/2021061602270.html