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More Crypto Regulation on the Cards in South Korea

South Korea's Financial Services Commission has issued guidelines to prepare the country for the legalisation of securities tokens.

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South Korea's financial watchdog has published guidelines on how digital tokens can be classified as securities and regulated as such under the country's Capital Markets Act.

According to the Financial Services Commission (FSC), digital assets are more likely to be classified as securities if they enable the investor to have stake in the operation of a business, the rights to dividends or residual assets, or if the token issuer attributes profits generated from the business to the investor.

The FSC added that the issuers and brokers of these tokens, including crypto exchanges, will be held responsible for making said evaluations in accordance with the new regulations. It also stated that the proposals are designed to prepare country for the legalisation of the issuance and distribution of securities tokens, and to achieve "responsible innovation without a gap in investor protection"

The new guidelines will be submitted as a proposal within the first half of 2023 to South Korea's National Assembly.

More regulations

Last week, it was reported that South Korea's Ministry of Justice is planning to track cryptocurrency transactions, in a bid to curb money laundering activities and recover funds linked to illicit sources.

According to local media outlet khgames, the country's Ministry of Justice is set to introduce a "Virtual Currency Tracking System,” which can be used to "monitor transaction history, extract information related to transactions and check the source of funds before and after remittance."

Read more: South Korea Tidies Disclosure Requirements After WEMIX Delisting

Earlier this month, the country's Supreme Court ordered Bithumb to pay damages to users who suffered losses during the exchange's service outage.

Growing ecosystem

Despite tightening regulations, South Korea still possesses a healthy web3 ecosystem, with the country enjoying highest digital penetration as a result of a tech-savvy population.

“Innovative new technologies such as blockchain could add value to national economic growth and development and hence, it is very natural for the government to adopt diverse digital applications and tools to leverage those technologies. In Korea, there are already many promising industry players working on blockchain projects, and if the Korean government could support the industry, Korea will have a well-earned reputation as a global blockchain leader," Shane Kim, CEO of global blockchain gaming platform WEMIX and vice president of its parent company WEMADE, told Blockhead.

Last year, a report by Ripple and Oxford Metrica revealed that Korea’s leading financial institutions are all actively pursuing the idea of adopting blockchain technology as a part of their mainstream operations, with 40% having already developed a proof of concept and 60% in the pilot stage of implementation.