South Korea: Lawmakers pass law mandating officials to disclose digital currency holdings

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South Korea’s parliament has passed a law requiring public officials to disclose their digital currency assets, according to a report from local news outlet News1.

The new law will include digital currencies in the list of private interests that public officials must make public in addition to cash, bonds, and stocks. Experts remark that the new law expounds on the existing Public Official Ethics Acts designed to eliminate the illegal acquisition of wealth amongst officials.

Widely regarded as the Kim Nam-kuk Prevention Act, the legislation was passed into law in record time, but rather than being enforced within a six-month time frame, policymakers are pining to reduce the enforcement date by two months.

“Given the current high level of public interest, especially regarding lawmakers, it’s not appropriate to enforce the law six months later after the promulgation,” Yun Jae-ok, a parliamentarian with the ruling People Power Party, said.

The bill was submitted to the country’s parliament following the allegations against lawmaker Kim Nam-kuk for using digital currencies to launder illicit gains. Another charge against Kim bordered on the claim he used his position as a lawmaker to push back the application of a digital currency tax regime.

Kim served on the Committee tasked with creating a new legal framework for digital assets in South Korea and reportedly liquidated his holdings before the ratification of the Financial Action Task Force’s (FATF) travel rule. Critics stated that his actions created a strong case of a conflict of interest, but Kim claims that his actions are within the ambit of the law.

 “This is a serious moral hazard. He appeared to have had a get-rich-quick-scheme with crypto trading,” Hong Joon-pyo, Daegu’s Mayor, remarked. “He should have left his job as a lawmaker and focused on speculative trading instead.”

South Korea’s digital currency industry is slowly recuperating following the scandals that rocked it in the wake of Terra and FTX’s collapse. Authorities have since upped the ante in policing the industry with a string of raids against digital currency firms suspected of illegality.

New strategies for industry control

Disclosures are the cornerstone of South Korea’s efforts to regulate its troubled digital currency industry. The country’s Financial Supervisory Service (FSS) announced plans in February to set up a digital asset disclosure system for the country in an attempt to crack down on virtual currency fraud.

“Disclosure information can increase market efficiency and protect investors,” Jeon In-tae, a professor at the Catholic University of Korea, noted. “It should be regarded as an obligation of a digital asset issuing institution, but there are no obligations or regulations.”

The central bank and the Financial Services Commission (FSC) are currently embroiled in a disclosure tussle involving the right to access data from virtual asset service providers in the country (VASPs).

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