In recent times, the Bank of Korea (BoK) is making efforts to ensure ample investors’ protection in regard to virtual assets. Reportedly, the bank is trying to make use of the “Virtual Assets Act” to target virtual asset operators.
Sources present in the Korean National Assembly’s Political Affairs Committee suggest that the Bank of Korea is attempting to clarify its authority under the “Virtual Assets Act.” It says that banks have the authority to force virtual asset operators and issuers to disclose data.
Previously, South Korea’s financial regulator, Financial Services Commission (FSC) raised objections to this plan but the agency now seems to have come to terms with it and given into it. Currently, Congress is gathering government viewpoints, and the FSC intends to publicly voice its stance at the bill’s first subcommittee meeting which is scheduled to take place on April 25.
While the BoK has been battling the regulator on this, it was just announced that the FSC declared to the National Assembly its willingness to accept it. Hence, as a result, the debate over virtual asset legislation is anticipated to heat up once again.
Reportedly, the National Assembly began discussing virtual asset-related laws last month. However, disagreements over whether the Bank of Korea gave the ability to seek data submission and whether the FSC defined the right to inspect virtual asset operators continue to exist.
Sources reveal that the Bank of Korea said that it should have the authority to seek data from virtual asset operators and issuers because of the strong character of the currency. The opinion that the bank tried to propagate behind it was that regulation by monetary authorities was required in the case of stablecoins.
On the other hand, the FSC adopted the opposite stance, arguing that if the BoK is engaged in the debate of the Virtual Asset Act, it might be seen as accepting the monetary character of virtual assets. In the context of the Financial Supervisory Service’s inspection rights, it is claimed that they have established a line stating:
If the Financial Supervisory Service’s inspection right is specified in the Virtual Asset Act, it will cause the general public to misunderstand that the virtual asset market/business operator is treated the same as the financial market/institution.
The Financial Supervisory Service is South Korea’s integrated financial regulator and is responsible for examining and supervising financial institutions under the broad oversight of the Financial Services Commission.
Sources reveal that the FSS will almost certainly have the authority to inspect cases associated with virtual assets. The majority of the already proposed measures include provisions that provide the FSC jurisdiction to examine unfair transactions while delegating the scope of work to the FSS.
A number of hedge funds and exchanges experienced overexposure as a result of TerraUSD’s sudden dissociation from its U.S. dollar peg in May, which had a ripple effect over the whole industry. The same month, some Luna (LUNA) investors from South Korea filed a complaint against Terraform Labs and co-founder Do Kwon, accusing them of fraud and breaking regional securities regulations.
Following the collapse of Terra USD (UST) and LUNA which wiped millions from the crypto marker, the South Korean authorities toughened their stance towards crypto entities. In August last year, the regulators expressed their desire to regulate stablecoins after being affected by the crash of the tokens.
Given the increasing threats from cryptocurrencies, South Korean regulators and lawmakers are eagerly looking forward to regulating the sector. The authorities are rapidly progressing with the development of crypto regulation to protect investors. While the clarity regarding crypto regulation is important, it is important to note BoK’s desire of gaining data from crypto entities.
Being alarmed by the happenings in the crypto sector last year including the collapse of the FTX exchange, the trust of the regulators in the crypto companies has dwindled. However, this is not just in Korea, the US regulatory head also wants crypto firms to disclose details of investment products.