South Korea is looking to pace up its regulations to prevent unfair trade in the industry. As such, the Financial Services Commission instructed five major crypto exchanges in the country to delist and classify digital assets with properties similar to securities.
The Financial Services Commission is the South Korean government’s top financial regulator, making financial policies and directing the Financial Supervisory Service.
In 2022, the once-prominent Terra ecosystem tokens implosion was the first domino to fall in an ensuing series of other high-profile collapses. As a result, regulators in the country have called for setting up comprehensive crypto regulations to protect investors.
According to a local media report, the regulator stated that many tokens listed and traded on existing crypto exchanges could be delisted or transferred to securities companies if proper guidelines were issued.
The DAXA- a crypto exchange group representing the largest firms in South Korea like Upbit, Bithumb, Coinone, Korbit, and Gopax- will be tasked with collecting the necessary feedback from each company through the transaction support division and delivering them to the regulator. The deadline for submission is February 9th.
Revealing their “Work Plan” for the year, the regulator stressed the need to revamp the regulatory system on the “issuance and distribution of financial investment items and digital asset securities (security tokens).”
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.
The development comes as the Korean police department highlighted numerous contracts with different domestic exchanges to prevent blockchain crimes. The police department also increased the headcount for blockchain security experts to help strengthen its investigations.
After the collapse of Terra and FTX, the South Korean authorities are submitting additional revisions to the Digital Assets Bill to gain more control over cryptocurrency exchanges.
Reportedly, Congressman Chang-Hyun intended to recommend that the nation’s Financial Services Commission and Financial Supervisory Service be given more authority “in lieu of self-regulation” of crypto exchanges. Customer deposits must now be kept separate under the new modification to the Digital Assets Act.
In November, the Financial Supervisory Service (FSS) reportedly stated that it has developed “a plan” to “enable virtual currency accounting.” The FSS said the proposal was drafted after consultations with the Korea Accounting Standards Service and the Korea Institute of Certified Public Accountants (KICPA).
The Korean authorities also dropped major exchanges from its local exchange establishment plan. In an official announcement, Busan city announced a steering committee consisting of 18 blockchain experts but none of the five exchanges were reported earlier in its plan. Instead, the exchanges had agreed to assist the city in establishing its first digital asset exchange. The five exchanges were FTX, Huobi Global, Crypto.com, Binance, and Gate.io.