On Monday, the South Korea’s Financial Services Commission (FSC) issued guidance on the regulation of security tokens and their issuance.
The Financial Services Commission, formerly Financial Supervisory Commission, is the South Korean government’s top financial regulator. It makes financial policies, and directs the Financial Supervisory Service, an integrated financial regulator that examines and supervises financial institutions.
According to the regulator, the digital assets that fit the characteristics of securities as defined in the Capital Markets Act, will be regulated as securities in the nation. It further explains that cryptocurrencies that offer a stake in business operations, and give holders rights to dividends, residual assets, or business profits, will fall under the category of securities under the Capital Markets Act.
Reportedly, the securities regulations mandates public disclosure requirements and prohibit unfair trade practices to protect the rights of investors.
However, sources reveal that the FSC said that cryptocurrencies that do not fall into the category of securities, however, will be regulated by the upcoming Framework Act on Digital Assets.
Notably, the digital assets that do not have an issuer, like Bitcoin (BTC) and Ethereum (ETH), will not be considered securities. The FSC will also permit Security Token Offerings (STOs) by making amendments to its Electronic Securities Act.
In November Todayq News reported The Special Financial Transactions Act, which was introduced in 2021 by the South Korean government, gave legal status to the concept of digital assets. According to the law, digital assets like Bitcoin and Ethereum will no longer be referred to as “cryptocurrencies” but rather as “Digital Assets.”
However, the FSC stated that token issuers and brokers, like crypto exchanges, will be required to assess which cryptocurrencies are securities on a case-by-case basis. This is similar to how companies have to self-determine whether they are issuing securities and follow the applicable regulations.
South Korean authorities have eagerly looked forward to establishing regulation for crypto assets. They have marked it as a priority for their “2023 Work Plan.”
The Ministry of Justice in South Korea also revealed plans to develop a crypto-tracking system dubbed- Virtual Currency Tracking System- to tackle money laundering initiatives and recover funds linked to criminal activities. The country essentially seeks to monitor transaction history, extract transaction-related data, and check the source of funds before and after the remittance.
Sources reveal that the newly built system is expected to be deployed in the first half of 2023. According to the South Korean ministry, the development of the tracking and analysis system will start in the second half of the year.