Asia’s Crypto Policy Debate: Traceability Claims, Hong Kong Oversight and Korea’s Market-Making Review
Reports from China, Hong Kong and South Korea highlight three separate crypto-policy concerns: tracing illicit funds, strengthening financial oversight and supporting orderly trading. The claims and proposals vary in how well they are documented. None amounts to a single regional crackdown.
- China’s reported warning challenges the idea that public-blockchain activity is untraceable.
- Hong Kong’s reported agreement focuses on regulators’ cooperation over reporting and audits.
- South Korea is reviewing market-making rules, but has not announced a new system.
- JPYC reportedly rose from 12 won to 37.6 won on Upbit, about 3.13 times its opening price.
China’s Reported Warning: Visible Transactions Do Not Reveal Every Identity
CoinGeek reported that China’s Ministry of State Security warned on September 28 that cryptocurrency does not shield criminal activity from the law. The report did not specify the year, and the original notice was not independently available for verification.
According to CoinGeek, the ministry warned that crypto could be used to launder proceeds from telecom fraud, online gambling, smuggling and other crimes. It also reportedly cited potential use by cybercriminals or foreign intelligence agencies to fund espionage, hide payments or demand ransom.
The report says the ministry challenged claims that crypto is “anonymous” or “untraceable.” On many public blockchains, transactions can be viewed through wallet addresses and tracked over time. But an address does not reveal a person’s name. Tying one to a real-world identity usually takes more information and investigative work. The result depends on the blockchain and the data available.
That distinction cuts both ways. Public records can help investigators follow funds, but they do not make every user instantly identifiable. CoinGeek’s account offered no examples or details about the methods or organizations involved in the tracing described by the ministry.
The report also attributed a warning about private keys to the ministry. A private key gives someone control over crypto assets. If it is lost, exposed or stolen, the owner may lose access. A custodial platform might help recover an account, but that is different from holding your own keys. Recovery may not be possible if the platform fails or becomes unreachable.
Hong Kong: Reported Expansion of Regulatory Cooperation
CoinGeek also reported that Hong Kong’s Securities and Futures Commission (SFC) and Accounting and Financial Reporting Council (AFRC) agreed to broaden their cooperation through a memorandum of understanding, or MoU. The report said the agreement replaces a 2021 MoU with the former Financial Reporting Council. It described the announcement as coming “last week, ” but gave no publication date to establish when.
As described in the report, the framework covers financial and compliance reporting for SFC-licensed virtual asset service providers, SFC-authorized funds and registered open-ended fund companies. The last two are regulated investment-fund structures. An open-ended fund can issue and redeem shares on an ongoing basis.
The reported areas of cooperation include related audit and assurance work, information sharing, case referrals, mutual assistance, and coordinated inspections and investigations. The agreement and the exact scope of its provisions were not independently available for verification.
If implemented as described, this means closer cooperation between regulators, not a new blanket restriction on crypto users. It could help the SFC and AFRC coordinate oversight of regulated firms and funds. Better coordination may strengthen reporting and audit scrutiny, though it could also add compliance work. Its value will depend on how the framework is applied.
South Korea Reviews Market-Making After JPYC’s Upbit Debut
In-Crypto reported that yen-linked token JPYC began trading on Upbit on September 17, but did not identify the year or trading pair. The token reportedly opened at 12 Korean won and reached 37.6 won within about an hour. That means it rose to roughly 3.13 times its opening price.
In-Crypto also described the peak as more than four times a separate yen-linked reference value, but did not explain how that benchmark was calculated. That comparison is different from the move between 12 won and 37.6 won. The report also gave no order-book data, trading volume or later price history to show how long the peak lasted.
South Korea’s Financial Services Commission (FSC) is reviewing whether to introduce a formal system for market-making, according to In-Crypto. Market makers typically place buy and sell orders to make trading easier and provide liquidity, which means you can buy or sell without sharply moving the price.
In-Crypto quoted Yoo Young-joon, identified as the FSC’s director of digital finance policy, saying: “We will also review the need to introduce systems such as market-making activities to increase the efficiency and stability of the digital asset landscape, ” and that “demands for discipline in this area are expanding.” That describes a review, not an adopted policy.
The same report said South Korea’s Virtual Asset User Protection Act has no specific exemption for market-making from its market-manipulation provisions. Without the law’s text or authoritative legal analysis, that does not prove that every form of placing buy and sell orders is prohibited. It does suggest firms may be unsure how the rules apply.
In-Crypto also summarized two research papers from 2024. It attributed one to Lee Min Jung of KB Securities, whose paper in Seoul Law Review reportedly considered whether a market-making carve-out might make sense as the market matured. The report attributed another paper to Yoonyoung Choi of Korbit Research Center, saying it linked the absence of a formal system to liquidity problems and cited the “Kimchi premium, ” the price difference between South Korean and overseas crypto markets, as an example of market inefficiency.
The papers’ titles, methods and full arguments were not available for verification. Their summaries should be treated as reported views, not established findings. The mention of the Kimchi premium also does not show that market-making rules caused it.
A well-designed framework could clarify what liquidity providers may do and where manipulation begins. But a carve-out without clear limits could leave room for abusive trading. More liquidity can make a market easier to use. It cannot guarantee that a token will hold a peg or trade at a fair price.
Key Questions and Answers
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Can public-blockchain transactions be traced to people?
Sometimes, but an address alone is not enough. Connecting an address to an identity usually takes additional information and analysis, and the evidence available varies by case.
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Does Hong Kong’s reported MoU impose new restrictions on crypto users?
Its reported focus is regulatory cooperation on reporting, audits and oversight of specified licensed or registered entities, not a blanket restriction on users. The agreement’s precise terms have not been independently verified here.
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Has South Korea approved a market-making system?
No. The FSC was reported to be reviewing whether one is needed. The available reporting established no final decision or proposed safeguards.
