On October 17, Lee Bok-hyun, head of South Korea’s Financial Supervisory Service (FSS), announced that the FSS is preparing regulations to supplement the Virtual Asset Users Protection Act (VAUPA) passed earlier this year.
The announcement was made during the National Assembly Political Affairs Committee audit of the FSS in Yeouido, Seoul. The National Assembly had ordered the Financial Services Commission (FSC) and the FSS to review the additional virtual asset discipline system and report on it by Jul 19 of next year, when the VAUPA law goes into effect.
According to the FSS head, the new virtual assets-related regulations will be ready by January, well before the VAUPA law enters into force.
The matters to be reviewed by the FSS include the resolution of conflicts of interest during the issuance and distribution of virtual assets, a disciplinary system for stablecoins, and a disciplinary system for businesses involved in virtual asset valuation, advisory services, and public disclosure.
Additionally, there is a focus on crafting a plan for establishing and operating an integrated market price and disclosure system and creating a ‘deposit law’ to address contingencies. The new regulations will be established in accordance with the ‘Virtual Asset User Protection Act.’
According to the FSS head, the Virtual Asset Users Protection Act passed in June did not have a sufficient regulatory framework. The law established criminal liability for violations but did not give FSS sufficient authority.
Lee confirmed that the coming regulations will be discussed with the Digital Asset eXchange Association (DAXA). “If there is truly an act that amounts to manipulation of distribution volume through staking or unfair disclosure, we will consult with DAXA,” he said.
DAXA is a self-regulatory organisation (SRO) founded in May 2022 by the five largest crypto exchanges in South Korea: Upbit, Bithumb, Coinone, Korbit, and Gopax. It cooperates with the South Korean government on regulatory matters concerning the digital asset industry.
On the National Assembly Inspection day, Lee said, “The Financial Supervisory Service is actively supporting responsible innovation in the financial industry,” and “We will create the foundation for a sound virtual asset market.”
The FSS’ response indicates their support for creating a stable virtual asset market in South Korea through the upcoming regulations and the VAUPA law.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash