This week, South Korea’s Financial Services Commission (FSC) has issued a warning to the public regarding crypto funds. In its warning, the South Korean watchdog pointed at the cryptocurrency funds and mutual funds have similar structures, which may result in investors into assuming that such funds are legal investments under the South Korea’s Capital Markets Act.
The FSC is mandated by the law to approve and register funds that raise capital from the public. Since cryptocurrency funds are neither approved nor registered, the FSC writes, “Therefore, cryptocurrency funds are subject to Capital Markets Act violation.” The regulatory body also revealed that it has plans to take cautionary measures to protect investors from financial harm after consulting with the relevant authorities.
South Korea, like India and China, has taken a rigid stance on cryptocurrency. According to reports, the FSC is currently scrutinizing a crypto fund issued by crypto exchange Zeniex, following requests made by investors. In January, the South Korean government had investigated six banks in the country as part of its effort to track and ban the use of virtual bank accounts for anonymous cryptocurrency trading. The Virtual Currency Anti- Money Laundering Guidelines was also launched, and, since then, the Korea Financial Intelligence Unit (KoFIU) and the Financial Supervisory Service (FSS) have been inspecting banks to ensure compliance with the guidelines.
Also, South Korea’s financial authorities had place a ban on all types of initial coin offerings (ICOs) in September 2017. However, the commission is reportedly considering whether its should start allowing digital token crowdsales in the country.
Since the South Korean watchdog is very active in monitoring the crypto industry, a new department is being set up by the FSC. In July, the FSC announced that a Financial Innovation Bureau will be created and dedicated to cryptocurrencies and blockchain. The department will focus primarily on developing policy-making initiatives for the country’s blockchain and fintech industry.
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