- South Korea’s Financial Services Commission (FSC) is preparing for the second phase of virtual asset legislation, focusing on various unregulated aspects of the cryptocurrency market.
- The move follows the recent passing of the “Virtual Asset User Protection Act,” a significant step towards defining digital assets and implementing penalties for unfair transactions.
South Korea’s financial regulators are gearing up for the second phase of virtual asset legislation, an initiative set to oversee previously unregulated areas of the cryptocurrency market. This regulatory endeavor follows the successful passage of the “Virtual Asset User Protection Act” by South Korea’s National Assembly last week, an act that delineates digital assets, stipulates penalties for illicit transactions, and empowers the Financial Services Commission (FSC) with oversight authority.
On Monday, the FSC wrapped up a working group meeting with a digital asset private joint task force (TF) to sketch out legislative measures for the full integration of virtual assets into the institutional system. This second phase aims to regulate virtual asset issuance and financing by digital asset operators, devise solutions for conflicts of interest in the issuance process, frame regulatory protocols for stablecoins, and address other crypto market aspects yet to be regulated.
Setting the Stage for Market Discipline
“We are gearing up for the second phase of virtual asset legislation even before the law comes into effect,”
stated an FSC spokesperson.
“We are in active discussions with relevant agencies such as the Ministry of Strategy and Finance, Ministry of Science and Technology, Ministry of Justice, Ministry of Administrative Security, the prosecution, the police, the Bank of Korea, and the Financial Supervisory Service. Our goal is to promote various measures to establish a robust market discipline system.”
South Korea’s National Assembly ratified the “Virtual Asset User Protection Act” on June 30, merging 19 crypto-related bills proposed by various legislators. This landmark act not only defines digital assets but also outlines penalties for crimes such as non-public information usage, market manipulation, and unfair practices. The Act also mandates insurance coverage, reserve funds, and record-keeping.
The new law assigns the FSC the responsibility of supervising and inspecting virtual asset service providers. Additionally, the Bank of Korea is empowered to solicit data from these service providers.
These latest developments come on the heels of the Terra-LUNA crisis in May 2022, which prompted South Korea to strengthen its crypto oversight and protection measures. On Tuesday, the Digital Asset eXchange Association (DAXA), a consortium of South Korea’s top five domestic crypto exchanges, announced its integration of an alert system to notify users about abnormal trading activity.