The last four months have been pretty torrid for virtual asset traders and service providers in South Korea following the aggressive stance of the Financial Services Commission (FSC). However, it appears that the agency is making a U-turn and has announced that it will promote the use of digital currency and safeguard the interest of investors.
In a parliamentary hearing, Kim Joo-hyun, Chairman of the FSC, disclosed that the financial regulator will support blockchain and intends to do this through collaboration with other national agencies.
“In cooperation with the National Assembly, we will actively support the establishment of a regulatory system for virtual assets that balances innovation through new technologies such as blockchain, consumer protection, and financial stability,” said Kim.
The FSC chairman told members of parliament that the agency is deliberating on rescinding its previous ban on banks and other financial institutions from facilitating digital asset transactions. Furthermore, he added that his agency would not be looking to pass new regulations for the industry. Rather it will use existing frameworks to govern the activities of virtual asset service providers (VASP).
Away from the actions of the FSC, South Korea’s government is reportedly working on an overarching piece of legislation for the entire industry. The Digital Asset Basic Act (DABA) is expected to be in force in 2023 and is poised to be the leading regulation for South Korea’s burgeoning industry. The wording of the bill has been considered pro-digital assets as the country aims to maintain its spot as a leader in its region in terms of adoption and regulation.
“The Digital Asset Basic Act is now in the research stage, and we expect to show,” said Jeong Jae-wook, a member of the ruling party’s virtual asset committee.
A chilling crackdown
Since Terra’s unfortunate collapse, South Korea’s regulators have been on the offensive against digital asset service providers. The FSC declared stiff penalties for exchanges in April for failing to meet the new compliance requirements before the September 24 deadline, with palpable fears of dozens of exchanges being shut down.
“Huge investor losses are expected with trading suspended and assets frozen at many small exchanges as customer protection will not likely be the priority of those exchanges facing an imminent closure,” said Cho Yeon-haeng, President of the Korea Finance Consumer Federation.
Law enforcement agencies raided the offices of several exchanges in connection to the Terra collapse, with police raiding the home of Terra co-founder Daniel Shin while the hunt for Do Kwon intensifies.
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