South Korea’s Financial Supervisory Service (FSS) is taking steps to introduce supplementary regulations for the Virtual Asset Users Protection Act, which was passed earlier in 2023. These new regulations are expected to be finalized by January, ahead of the law’s implementation. FSS Head Lee Bok-hyeon shared these developments during a recent audit conducted by the South Korean National Assembly Political Affairs Committee on October 17th.
The move to introduce supplementary regulations stems from concerns that South Korean investors are at risk of losing money through speculative investments in “burger coins,” a Korean colloquial term for foreign-issued cryptocurrencies traded within the country.
The forthcoming regulations are expected to encompass various aspects of the virtual asset ecosystem, including listing procedures, internal controls, and issuance and distribution of virtual assets. Additionally, a “virtual asset market supervision and inspection system” will be established. These regulations have been developed in consultation with the Digital Asset eXchange Association (DAXA), which represents prominent South Korean crypto exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax.
Lee expressed the need for more comprehensive regulatory frameworks, stating that the legislation passed in June lacked specific regulatory details. While it introduced criminal liability for violations, the law didn’t grant the FSS the necessary authority to address some of the regulatory challenges. Lee explained that if there are acts that manipulate distribution volumes through staking or involve unfair disclosure, the FSS will collaborate with DAXA to address these issues. He noted that unlike the securities sector, where various screening mechanisms are in place, similar systems are lacking within DAXA or individual cryptocurrency exchanges.
As part of the broader effort to strengthen oversight and enforcement in the crypto space, South Korean law enforcement is also establishing a Joint Investigation Centre for Crypto Crimes. This initiative will bring together 30 staff members from various government agencies, including the FSS, National Tax Service, Korea Customs Service, and others, to collaboratively investigate virtual asset-related crimes.
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