Taxes Are Collected, but... Financial Authorities Say "No Investor Protection for Virtual Currency"

Government: "It is questionable whether we should protect just because many people invest"

Financial Services Commission Chairman Eun Sung-soo and Vice Minister of the Ministry of Patriots and Veterans Affairs Lee Nam-woo are attending the full meeting of the Political Affairs Committee held at the National Assembly on the 22nd, talking during the meeting. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Jang Sehee] The government has officially stated that it cannot protect investors regarding the recent frenzy surrounding cryptocurrencies. However, experts agree that since taxation on virtual assets is being implemented, not only crackdowns on illegal activities but also regulatory management of the industry should be carried out.

According to related government departments including the Financial Services Commission, the Office for Government Policy Coordination, and the Ministry of Economy and Finance on the 23rd, the government concluded that cryptocurrencies are not "financial products," and therefore, aside from illegal activities, it does not have the authority to oversee the market. A government official stated, "It is already possible to verify the safety of cryptocurrency exchanges, including anti-money laundering systems, under the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Transactions Act)." They intend to focus only on illegal funds, terrorist financing, and the like.

On the 22nd, Eun Sung-soo, Chairman of the Financial Services Commission, said at the National Assembly's Political Affairs Committee, "In the stock market or capital market, there are investors who are protected, but there is a different view on whether all those who enter virtual assets should be protected," emphasizing, "I do not think protection is necessary just because many people invest."

He added, "If people go down the wrong path, I think adults should talk to them, and if we protect assets that increase by 20% a day, I am convinced it will only encourage more to go that way."

Government: "No investor protection... Full blockade of illegal activities such as money laundering and fraud"

The government emphasizes blocking illegal activities such as money laundering and fraud rather than protecting investors.

The Financial Services Commission plans to strengthen primary monitoring by financial companies when virtual assets are withdrawn and to enhance cooperation between investigation and enforcement agencies so that the Financial Intelligence Unit's (FIU) analysis results of suspicious illegal transactions are promptly notified to investigative and tax authorities.

The police plan to specialize by subdividing dedicated departments according to types of illegal virtual asset activities and to strengthen expertise by expanding the distribution of virtual asset tracking programs. The Fair Trade Commission plans to conduct ex officio investigations into the terms and conditions of virtual asset operators to identify and correct unfair clauses.

The Ministry of Economy and Finance will also strengthen inspections of violations of related laws such as the Foreign Exchange Transactions Act in cooperation with the Financial Supervisory Service.

Additionally, the government plans to disclose the status of registration applications on the FIU website so that the public can check the progress of virtual asset operators' filings.

Academia: "At least guidelines are needed... If it leads to the entire economy, it becomes a bigger problem"

However, academia advises that if it is difficult to establish industry-specific laws, the financial authorities should at least create guidelines.

Professor Kim So-young of Seoul National University’s Department of Economics said, "It is true that cryptocurrencies are not financial products because they have no intrinsic value," but added, "If volatility in the financial market increases and leads to problems for the entire economy, the issue could become much bigger." She also stated, "Since taxes are imposed on virtual assets, thorough monitoring of profits should at least be in place."

Professor Sung Tae-yoon of Yonsei University’s Department of Economics also said, "Simply because they are not products does not mean they should not be regulated," emphasizing, "Monitoring illegal transactions is absolutely necessary, not for investor protection but to prevent unlawful activities."