Table of Contents
South Korea’s central bank, the Bank of Korea, has been given the green signal to probe crypto firms and operators of virtual assets operating in the country.
This go-ahead will allow the bank to access data related to cryptocurrency transactions from exchanges operating in South Korea.
A Landmark Development
The go-ahead given to the Bank of Korea is viewed as a landmark development, given that the central bank holds differing views with the country’s financial regulatory authority, the Financial Services Commission (FSC). The Korean Central Bank and the Financial Services Commissions have been at loggerheads regarding jurisdiction over crypto. Crypto regulation has been under discussion in the National Assembly, with the Financial Services Commission submitting that it accepted granting the Bank of Korea authority to probe cryptocurrency firms operating in the country.
The National Assembly is currently accepting opinions regarding the Virtual Asset Act from the government. The central bank’s authority to request data submissions from crypto firms is also being explored in the act. The Financial Services Commission is set to express its official position regarding the matter at the bill’s first subcommittee, which is scheduled to meet on the 25th of April. This could pave the way for the faster implementation of the Virtual Asset Act.
The Bank of Korea, in its submissions, has stated that it holds the authority to request for data on crypto firms and other digital and virtual asset issuers, specifically for stablecoins. The Bank of Korea stated that it is logical for it to regulate crypto since any potential risk from digital assets could spread to the traditional financial system. Meanwhile, the Financial Services Commission does not want crypto to be viewed on par with the traditional financial system. It added that if the central bank was given the authority to govern crypto and crypto firms, it could send out the message that digital assets were financial assets. In its submission, the Financial Services Commission stated,
“If the Virtual Asset Act specifies the inspection right of the Financial Supervisory Service, it will cause the general public to misunderstand that the virtual asset market/business operator is treated the same as the financial market/institution.”
The Financial Services Commission Chair has repeatedly stated that he does not view cryptocurrencies and digital assets as financial instruments.
Crypto Legislation In Limbo
The South Korean government has repeatedly tried to push legislation around cryptocurrencies and crypto firms operating in the country. However, the turf war between the Bank of Korea and the Financial Services Commission has proved to be a major stumbling block. Kim Han-gyu, the Democratic Party lawmaker that proposed the Crypto Assets Act, has stated,
“The Financial Services Commission admits that it is necessary for the Bank of Korea to have the right to request data, but it is refusing to include it in the bill.”
The Financial Services Commission has also come under fire from officials of the Political Affairs Committee, a division of South Korea’s State Affairs Commission. Officials from the committee have accused the Financial Services Commission of trying to monopolize its position as a crypto regulator.
South Korea’s Crypto Struggles
The crypto space in South Korea has faced several issues over the past year. The problems began with the spectacular collapse of the Terra ecosystem and its associated stablecoin. Terra founder Do Kwon was recently arrested in Montenegro, along with another suspect, Hon Chang Joon. Both South Korea and the United States have requested their extradition. More recently, several staff members from the cryptocurrency exchange Coinone were taken into custody amidst allegations of bribery, breach of trust, and other criminal acts.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.