• Wed. Jun 22nd, 2022

South Korea plans to tighten licensing of digital currency industry

ByHazel R. Lang

May 22, 2022

The scope of regulations regarding the digital currency space in South Korea is becoming clearer. The South Korean parliament is currently considering several recommendations made by the Financial Services Commission (FSC).

Korea Economic Daily (KED) got an exclusive insight into the FSC report titled “The Benchmarking of Virtual Property Industry Law”. Highlights of the document indicate new regulations aimed at introducing stricter licensing requirements for digital currency exchanges and token issuers based on the risks involved.

A recommendation of the document is to require token issuers to submit a whitepaper to the FSC. The white paper should contain details about who the founders are and how the ICO funds will be spent.

After the initial filing of the white paper, any updates must be submitted to the FSC seven days before they become effective. The law will also apply to token issuers who are not South Korean nationals.

Regarding stablecoins, the FSC has recommended that stablecoin issuers be required to adhere to defined asset management plans in how they use collateral and the number of coins they can mint.

Additionally, recommendations are made to mitigate insider trading, pump and dump schemes, price manipulation, and washout trading between digital currency exchanges. It will also set industry-standard transaction fees.

According to the KED report, the National Assembly considers the legislation one of the “most urgent protections”. The legislation, if passed, will replace the Capital Markets Act under which the digital currency space currently operates.

Penalties for breaking the law include fines and even jail time. These will be stricter than the Capital Markets Act sanction and will be enforced by a new watchdog, the Digital Assets Management Institute.

South Korea, Terra, and Digital Currency Regulation

The FSC document comes after another leaked report said South Korea plans to speed up its Basic Digital Assets Act (DABA) to ensure enforcement begins in 2024.

South Korea’s renewed rapid pace to regulate the digital currency market has been linked to the chaos caused by South Korea’s Terra project. According to a CNBC report, the government is currently investigating Terraform Labs and its CEO Do Kwon, as well as local stock exchanges.

Meanwhile, South Korea recently unveiled regulations for digital currency exchanges that introduced new travel rules. The legislation was an addition to another tranche of licensing requirements made last year.

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