The South Korean authorities have laid out a regulatory roadmap to enhance the legal framework for digital asset regulation. This initiative comes in response to the ratification of the Virtual Asset Users Protection Act in June.
The Head of South Korea’s Financial Supervisory Service (FSS) has emphasized the need for more comprehensive regulatory structures.
Currently, the FSS of South Korea is actively working on crafting additional regulations to reinforce the Virtual Asset Users Protection Act. This act became effective earlier in 2023. According to the FSS Chief, these fresh regulations are expected to be finalized by January, ahead of the full implementation of the law.
South Korean FSS Audit Highlights Concerns Over Crypto ‘Burger Coins’ and Future Regulatory Initiatives
On October 17, the South Korean National Assembly Political Affairs Committee conducted an audit of the FSS. During this session, the head of FSS, Lee Bok-hyeon, addressed concerns regarding financial losses experienced by South Koreans.
These losses were a result of investments in crypto “burger coins,” which is a colloquial term for foreign-issued cryptocurrencies traded within South Korea.
The FSS is preparing to introduce comprehensive guidelines covering various aspects. These aspects include listing protocols, internal management mechanisms, and the creation and allocation of virtual assets.
Additionally, reports from South Korean media regarding the audit indicate the establishment of a “virtual asset market surveillance and examination system.” Lee clarified that these upcoming regulations are being discussed in collaboration with the Digital Asset eXchange Association (DAXA).
Digital Asset Regulation in South Korea: DAXA, Challenges, and the Joint Investigation Centre
DAXA is a consortium comprising local crypto exchanges such as Upbit, Bithumb, Coinone, Korbit, and Gopax.
Lee raised concerns about the extent of regulation in the law passed in June. Although it introduced criminal accountability for violations, Lee argues that it didn’t grant sufficient authority to his agency. He emphasized that if actions resembling the manipulation of distribution volume are identified, consultations would be initiated with DAXA.
These actions may involve practices like staking or biased disclosure. Lee provided further elaboration:
“In the securities sector, a multitude of screening mechanisms are in place regarding the issuance market, but no such systems currently exist within DAXA or among individual exchanges.”
The South Korean law enforcement authorities have revealed plans to create a collaborative task force. This task force, named the Joint Investigation Centre for Crypto Crimes, will focus on investigating virtual asset-related offenses.
Additionally, It will consist of 30 individuals selected from various government entities, including the FSS, National Tax Service, Korea Customs Service, and others.