South Korea’s central bank, the Bank of Korea (BoK), has been given the green light to intensify its scrutiny of cryptocurrency service operators and issuers. According to The Korea Herald, the BoK will now be able to investigate cryptocurrency-related businesses and request transaction data from crypto exchanges. This move comes as South Korea is looking to further discuss virtual asset legislation and regulate the sector to protect investors.
The BoK expressed concerns over financial stability risks from stablecoins, and its right to request data from digital currency operators was confirmed by an official from the National Assembly’s Political Affairs Committee. The Financial Services Commission (FSC), the country’s financial regulator, will have the final say in governing the regulation of the digital asset sector.
Democratic Party lawmaker Kim Han-gyu, who proposed the country’s Crypto Assets Act, said, “The Financial Services Commission admits that it is necessary for the Bank of Korea to have the right to request data, but it is refusing to include it in the bill.”
South Korea’s Financial Supervisory Service, which operates under the FSC, announced the Digital Assets Committee in mid-2022, to investigate crypto-related issues. The FSC has also taken enforcement actions against crypto companies, and considers crypto assets securities, similar to the United States Securities and Exchange Commission.
However, the FSC and the BoK have been competing over crypto jurisdiction, with the former accused of monopolizing its position as a crypto regulator. The FSC warned that if the central bank governs crypto, it will send the message that digital assets have the same standing as traditional finance. The BoK’s desire for gaining data from crypto entities has created more confusion regarding regulation clarity.
South Korea’s authorities have been actively working towards developing crypto regulation to protect investors. With the increasing threats from cryptocurrencies, lawmakers are eagerly looking forward to regulating the sector. The country’s crypto regulations, the Crypto Assets Act, are still under discussion and are yet to be finalized.
Recently, South Korea was affected by the collapse of Terra USD (UST) and LUNA, which wiped millions from the crypto market, leading to the authorities toughening their stance towards crypto entities. After being impacted by the token crashes, the regulators also indicated their willingness to control stablecoins in August of last year.
The BoK’s decision to ramp up its scrutiny of cryptocurrency service operators and issuers comes amid growing concerns about the metaverse and its impact on the financial world. The metaverse is a virtual world where people can interact with one another in real-time, purchase virtual assets, and conduct transactions. Some experts predict that the metaverse could revolutionize the way people use and interact with money, leading to the creation of new financial instruments.
The move towards regulating the crypto sector in South Korea is part of a global trend as regulators and governments around the world attempt to understand and regulate digital assets. The outcome of the discussions between the BoK and FSC will be crucial in determining the future of the crypto industry in South Korea. It remains to be seen how the country’s crypto regulations will impact the broader financial world, including the metaverse.