The Bank of Korea believes new legislation is needed to handle and monitor virtual assets (cryptocurrency). The Bank of Korea stressed the need for the central bank to regulate and monitor “stablecoins,” which may be utilized as legal money in the future. Stablecoins have value stabilization devices to keep their value.
The Bank of Korea published a study on “Key Issues and Legislative Directions Relevant to Crypto Asset Regulation” on the 5th for legislative debates in the National Assembly, government, related organizations, academic circles, and research institutions.
Cryptocurrencies have a distinct issue structure and market system than stocks and currencies, making them challenging to govern using conventional procedures. A specific legislation is needed to regulate them. Even as a payment method, it is evaluated that present restrictions cannot be applied since conventional payment methods are distinct in form, function, and character.
Thus, the Bank of Korea advocated for cryptocurrency restrictions. He believes bitcoin exchanges should be registered as stock companies. He also advocated for capital restrictions and external audits.
He suggested implementing IEO (Initial Exchange Offering), which restricts fundraising by directly exposing cryptographic assets and permits only cryptocurrency exchange-vetted issuance. In the event of non-explanation, damages must be clarified and unfair trade activities including insider trading, market manipulation, and fraudulent trading must be regulated.
It is suggested that bitcoin enterprises be required to implement trading platform rules to avoid conflicts of interest and build an internal control mechanism. He stressed the necessity for client asset storage, reserve asset management, and cryptocurrency exchange prohibitions.
When adopting cryptocurrency rules, stablecoin issuers and associated service providers must be reviewed separately from regular cryptocurrencies.
Value-stabilized cryptocurrencies are used in the payment and settlement system, hence the Bank of Korea believes issuers should be restricted. A coin run might destabilize the financial market by transferring risks.
He stressed that the Bank of Korea Act should govern the won-based stablecoin system and its monitoring role. Discussing whether to restrict the “Foreign Exchange Transactions Actapplicability “‘s to global stablecoins’ local activities is also required.
It also stated their bitcoin taxation perspective. He stated cryptocurrency’s legality must be determined before taxes. Taxes may vary based on legal nature, thus it is envisaged that taxation would also be diversified according to each government’s bitcoin regulatory direction. Cryptocurrency is still in the taxes blind area since some nations, including Korea, have not defined its legality or finalized their taxation systems.
At the same time, it was disclosed that cryptocurrency would be taxed if it meets taxation standards and exempted if it is utilized as a payment method.
“In the case of cryptocurrencies (including stablecoins), which are extremely likely to be used as a method of payment, it is vital not to produce regulatory margins with current laws relating to payment and settlement, such as the Electronic Financial Transaction Act,” the Bank of Korea stated. Central banks must monitor huge stable-value cryptocurrencies.