Chairman of South Korea’s Financial Services Commission voices support for blockchain innovation and user protection in the crypto market

The chairman of South Korea's Financial Services Commission (FSC), Kim Joo-hyun, announced the agency will promote the utilization of blockchain technology and user protections in the crypto market at the National Assembly parliamentary audit on the FSC on Oct. 5, 2022.

During the opening remarks, Kim said the FSC will actively work with the National Assembly on a regulatory system for digital assets that complements innovation via emerging technologies 'such as blockchain, consumer protection and financial stability.'

Kim also mentioned the FSC's upcoming reforms on regulation in the financial sector will align with promoting the success of digital transformation in the country. He stressed the priority of reviewing the scope of businesses and restrictions on investment in subsidiaries by financial companies. The goal is to promote the financial companies' transition to running their operations in IT, platform businesses, and investments in new technologies.

The FSC will also review the current ban on banks from directly entering the crypto market. Central banks in Korea called for a regulation on initial coin offerings in September 2022 in a bid to reverse the ban on local crypto companies from carrying out ICOs to raise funds by selling cryptocurrencies, implemented by the FSC in 2017.

As for promoting user protection in the crypto market, Kim said the FSC will supervise virtual asset service providers by adhering to the legislation passed in 2019, which mandates crypto exchanges to undergo audits and report customer data to combat money laundering and tax fraud.

Regulatory changes are paving the way for banks to pursue business in the crypto sector

Following the shutdown of OKEX and Binance in South Korea as a result of the legislation and the then-looming 20% crypto tax gains legislation, financial companies involved in the crypto business were operating in a climate of fear amid the crackdown.

In August 2022, 16 crypto platforms faced suspension in South Korea as the Korea Financial Intelligence Unit (KoFIU) reportedly alerted the investigating authority about these platforms carrying out illicit business activities and operating without a license in the country. Since then, the South Korean government announced it postponed the crypto tax to 2025.

The most recent development in the country's controversial series of regulations is the Digital Assset Basic Act, which is expected to be enacted in 2023. This will allow banks to directly engage in business in the crypto space by offering services to crypto investors and see the Bank of Korea Act revised to allow the introduction of a central digital bank currency (CBDC).