In June, the Virtual Asset Users Protection Act was ushered into existence without the necessary regulatory underpinning, as highlighted by the chief of South Korea’s Financial Supervisory Service. The FSS of South Korea is actively formulating supplementary regulations to fortify the Virtual Asset Users Protection Act, ratified earlier in 2023, as per local reports. Anticipated to be finalized by January, these new regulations are poised to be in effect concurrent with the law’s enforcement, revealed the head of FSS.
On October 17, the Political Affairs Committee of the South Korean National Assembly scrutinized the FSS, during which Lee Bok-hyeon, the head of FSS, responded to criticisms asserting that South Koreans were incurring losses due to crypto “burger coins” – a colloquial term denoting foreign-issued cryptocurrencies traded within South Korea. FSS is gearing up to institute criteria for listing processes, internal controls, and the issuance and distribution of virtual assets. Additionally, there will be the establishment of a “virtual asset market supervision and inspection system,” according to South Korean press coverage of the audit. Lee disclosed that ongoing discussions regarding these impending regulations involve consultations with the Digital Asset eXchange Association (DAXA), comprising local crypto exchanges Upbit, Bithumb, Coinone, Korbit, and Gopax.
Expressing dissatisfaction, Lee noted that the legislation passed in June lacked regulatory granularity. While the law imposed criminal liability for infractions, Lee asserted that it failed to confer sufficient authority upon his agency. He emphasized the need for collaboration with DAXA in cases involving manipulation of distribution volume through staking or unfair disclosure, stating:
“There are established systems in the securities sector for diverse screenings linked to the issuance market, but analogous systems are absent at DAXA or individual exchanges.”
In response to this regulatory gap, South Korean law enforcement has outlined plans for a collaborative virtual-asset crime investigation unit named the Joint Investigation Centre for Crypto Crimes. Comprising 30 staff members drawn from various government agencies, including the FSS, National Tax Service, Korea Customs Service, among others, the unit aims to combat illicit activities within the realm of virtual assets.