South Korean Financial Services Commission to Support Bank of Korea’s Request to Investigate Virtual Asset Data

On April 24th, it was announced that the South Korean Financial Services Commission will support the Bank of Korea’s request to investigate data from virtual asset operators and issuers. The South Korean Financial Services Commission plans to formally express this position at the bill subcommittee held on the 25th of this month. Previously, the Korea Financial Services Commission believed that if the Bank of Korea participated in the discussion of the virtual asset law, it would be equivalent to recognizing the monetary nature of virtual assets. However, recently, the position of the Korea Financial Services Commission has changed. (The Korea Herald)

The South Korean Financial Services Commission may support the central bank’s request to investigate data from virtual asset operators and issuers

On April 24th of this year, it was announced that the South Korean Financial Services Commission (FSC) is to support the Bank of Korea’s (BoK) request to investigate data from virtual asset operators and issuers in the country. The FSC plans to express this position formally at the bill subcommittee held on April 25th, 2021. Previously, the FSC believed that if the BoK were to participate in discussions regarding virtual asset regulation, it would be tantamount to acknowledging the monetary nature of such assets. However, the FSC’s position regarding virtual assets has changed of late.

Introduction to South Korean Virtual Asset Regulation

South Korea was one of the first countries in the world to create specific regulations regarding the handling and trading of virtual assets. The country’s cryptocurrency industry has grown substantially in recent years, and to ensure that this industry develops within a legal framework, the country has taken a proactive stance concerning the regulation of virtual assets. In 2017, South Korea imposed an ICO ban and established legislation pertaining to virtual currency exchange businesses. Later in March 2021, the country designated a legal transition period for cryptocurrency exchanges, mandating that users comply with formal identification procedures when using said exchanges.

South Korean Financial Services Commission’s Recognition of Virtual Assets

The South Korean Financial Services Commission (FSC) – established in 1998 to oversee the country’s financial institutions to ensure their soundness and stability – has long been skeptical of virtual assets in the country. However, following the events of 2021, the FSC has begun to take virtual assets more seriously. Virtual assets are exempt from FSC regulation, and the FSC’s recent change of heart marks a significant shift in the way that these assets are viewed in South Korea.

Bank of Korea’s Request For Virtual Asset Data

In early April 2021, the Bank of Korea (BoK) formally requested that virtual asset companies in South Korea submit data regarding their operations to the bank. The BoK stated that they needed this data to formulate policy regarding virtual assets better. The move by the BoK, which previously took a defensive approach to virtual assets, is indicative of the country’s overall growing recognition of virtual assets as legitimate financial instruments.

South Korean Financial Services Commission To Support Bank of Korea’s Request

The South Korean Financial Services Commission (FSC) has come a long way in their perception of virtual assets. Whereas previously, the FSC was against virtual assets’ regulation or acceptance, they are now prepared to back the Bank of Korea’s request. The South Korean authorities appear to be aligning toward placing more stringent regulatory measures on virtual asset usage, trading, and management.

The Challenges of Regulating Virtual Assets

While the regulation of virtual assets is a necessary step for countries, it is not without its challenges. The distributed nature of cryptocurrencies makes them challenging to regulate in a traditional sense. A failure to take the changing world of virtual assets seriously, however, could lead to economic instability and a lack of confidence amongst investors. Virtual assets straddle areas of fiscal policy, monetary policy, and tax regulation, making it difficult to find both, the appropriate regulatory framework and a consensus on how to apply said regulations.

Conclusion

South Korea’s approach to virtual assets is evolving rapidly, and the recent news that the South Korean Financial Services Commission will back the BoK’s request to investigate virtual asset data is a significant step towards more comprehensive regulation of virtual assets within the country. While the implementation of regulation is complicated, premature, or over-eager regulation, however, could discourage investors from joining this promising market.

FAQs

Q1. Are virtual assets regulated in South Korea?

A1. Yes, virtual assets are subject to regulation in South Korea, with cryptocurrency exchanges operating under specific laws and regulations, and ICOs having been banned since 2017.

Q2. What kind of data is the Bank of Korea requesting from virtual asset operators?

A2. The exact details surrounding the data requested by the Bank of Korea from virtual asset operators have not yet been disclosed.

Q3. What is the South Korean Financial Services Commission (FSC), and what is their role in regulating virtual assets?

A3. Established in 1998, the South Korean Financial Services Commission oversees the country’s financial institutions to ensure their soundness and stability. While virtual assets are currently exempt from FSC regulation, the recent change of heart by the FSC indicates a shift in the way it views virtual assets.