Global: South Korean Regulator Takes Strides to Strengthen Digital Asset Regulations

The Financial Supervisory Service (FSS) of South Korea is actively working on supplementary regulations to reinforce the Virtual Asset Users Protection Act, which was enacted earlier in 2023, as reported by local sources. The FSS is on track to finalize these new regulations by January, just before the law’s implementation.

The FSS came under scrutiny during an audit conducted by the South Korean National Assembly Political Affairs Committee on October 17. The concerns revolved around South Koreans’ investments in “burger coins,” a term used in Korean slang for foreign-issued cryptocurrencies traded in South Korea.

In response to the audit findings, Lee Bok-hyeon, the head of the FSS, announced a series of measures aimed at enhancing the regulatory landscape for virtual assets. One notable step is the establishment of standards for listing procedures, internal controls, and the issuance and distribution of virtual assets. Additionally, there will be the creation of a “virtual asset market supervision and inspection system.” These measures are being developed in collaboration with the Digital Asset eXchange Association (DAXA), comprising major local crypto exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax.

Lee Bok-hyeon emphasized the need for more comprehensive regulatory guidelines, as he found the legislation enacted in June to be lacking in regulatory specifics. While the law did establish criminal liability for violations, it didn’t grant the FSS adequate authority. Lee stated that in cases involving activities like the manipulation of distribution volume through staking or unfair disclosure, his agency would consult with DAXA.

He noted the absence of systems related to various screenings of the issuance market in the virtual asset sector, which exist in the securities industry. The FSS aims to rectify this gap with the upcoming regulations.

In another significant development, South Korean law enforcement intends to create a Joint Investigation Centre for Crypto Crimes, a collaborative effort involving 30 staff members from various government agencies, including the FSS, National Tax Service, and Korea Customs Service. This specialized unit will be dedicated to investigating virtual asset-related criminal activities.