Financial Services Commission Expands Cryptocurrency Team to 4 Members... Formal Department Establishment Also Under Discussion

Official Request for Establishment of a Formal Department at the Ministry of the Interior and Safety

[Asia Economy Reporters Sunmi Park and Jinho Kim] Financial authorities, which had previously ignored virtual currencies, are now preparing to regulate and supervise by establishing dedicated departments and expanding personnel. This move comes after the government assigned the Financial Services Commission (FSC) the tasks of managing and supervising virtual currency operators and improving related systems on the 27th, and in anticipation of the ruling party preparing legislation that designates the FSC as the main regulatory body.

According to financial authorities on the 31st, the FSC is continuing discussions with the Ministry of the Interior and Safety and the Financial Intelligence Unit (FIU) under the FSC to establish a formal dedicated department for virtual currencies.

A senior FSC official stated, "We have officially requested the Ministry of the Interior and Safety to establish a formal department," adding, "Considering the urgency of the recent situation surrounding virtual currencies, we are actively pursuing this matter." Since both the government and political circles are seriously examining virtual currency issues, it is expected that the Ministry of the Interior and Safety will approve the request soon.

Before establishing the formal department, the FSC has already added three additional officers dedicated to virtual currency issues. Previously, only one person was responsible for monitoring the virtual currency market, but now the total personnel has increased to four. These four will work as a short-term task force (TF) until the department is officially established. Their main duties include understanding the status of virtual currency exchange operators, preparing for registration, and future inspections.

A financial authority said, "If the related legislation passes, it is highly likely that the control tower will shift from the current Office for Government Policy Coordination to the FSC."

The Financial Supervisory Service (FSS) has also begun preparing to align with the FSC’s exclusive management and supervision of virtual currency operators and system improvements. If a formal department is established within the FSC, there is a possibility that the FSS will also form a dedicated department or TF team to expand its role accordingly.

A financial authority explained, "Within the FSS, the Digital Finance Supervision Bureau and the Anti-Money Laundering Office handle virtual currency-related tasks, but depending on the FSC’s decision on the dedicated virtual currency organization, the FSS will discuss forming an organization to assist with these tasks," adding, "Actions will follow once the FSC finalizes how it will handle virtual currency operations."

Another official said, "First, to enable virtual currency operators to file early registrations before September 24, the FSS plans to provide consulting related to registration together with the FSC and the Ministry of Science and ICT," explaining, "Preparations are underway within the FSS’s Anti-Money Laundering Office."

[Image source=Yonhap News]

Focus on Strengthening Virtual Currency Management System and Operator Oversight

Although specific tasks have not yet been finalized beyond the financial authorities taking charge of virtual currency management, supervision, and system improvements, the basic direction is to strengthen the virtual currency management system. It is expected that efforts will focus on promptly encouraging registration and providing consulting so that operators can submit registration documents to the FIU under the FSC by September 24.

Upon receiving operator registrations, financial authorities plan to conduct swift reviews to facilitate rapid market restructuring centered on early-registered operators. They are also paying attention to transparently disclosing registration application and acceptance statuses, as well as trading precautions, so that market participants can respond in advance to the possibility of operator closures.

Sunho Lee, a research fellow at the Korea Institute of Finance, suggested in his report on "Directions for Virtual Asset Regulation and Supervision" that "it is necessary to strengthen the qualification requirements for operators," and recommended, "It is essential to specify the mandatory contents and formats that must be included in the whitepapers issued when virtual currencies are launched, and to establish institutional measures to hold issuers and handling businesses accountable if the operations of virtual currency businesses do not proceed as described in the whitepapers."