Representations of cryptocurrencies and five major banks in South Korea are shown in this illustration. (The Korea Herald)
A joint task force launched by the Financial Services Commission on Wednesday kicked off its first monthly meeting on setting up a framework for digital assets like bitcoin, a week after the top financial regulator said it would work to remove regulatory uncertainty facing South Korea’s crypto industry.
Introducing a legal framework for cryptocurrencies is part of the larger deregulation initiative the FSC has been pursuing since President Yoon Suk-yeol, who had pledged to make that happen, took office in May. Industry watchers expect the change to take place as early as late this year.
“We’re here to discuss what has been talked about digital assets and come up with ways to balance consumer protections with financial stability,” FSC Vice Chairman Kim So-young said at the joint meeting attended by officials from other bodies like the Finance and Justice Ministries. Civilian experts also took part.
Cryptocurrency investors in Korea have long complained that they are not offered the same customary protections that apply when banks fail, though the crypto industry is not seen as eager to invite government intervention, saying it brings excessive scrutiny the industry wants gone in the first place.
“Digital assets could be a real threat to financial stability,” said Kim Kab-lae, head of the consumer protection research center at the Korea Capital Market Institute, referring to crypto volatility. “That’s why there’s been debate over who issues the assets and what oversight is the best.”
And the task force should back efforts to make market participants handle digital assets responsibly so as to help the economy advance, Vice Chairman Kim said, noting the group should be proactive in its work despite the fact that there is little to refer to when making new rules.
There is no global body on crypto rules but in May, the International Organization of Securities Commissions suggested a joint body could be launched by next year.
“There is a wall of worry about this (crypto) in the conversations at an institutional level,“ said Ashley Alder, chair of the global market regulator’s board.
The FSC has said it will look at crypto frameworks under the European Union and Japan as it prepares legislation. The agency, which could put a bill to a National Assembly vote, has said it will send its own version to the parliament instead of watching bills lawmakers had floated turn into law.
Once the rules are drawn, authorities are expected to discuss an initial exchange offering. A byproduct of initial coin offerings, IEOs use exchanges as middlemen running due diligence on firms floating coins and marketing them to customers. Binance was the first major crypto exchange to back an IEO in 2019.