"Creating a Dedicated Cryptocurrency Team"... Financial Authorities Assert Their Presence (Comprehensive)

Financial Services Commission Expands Dedicated Cryptocurrency Staff... Plans to Establish Official Department
Financial Supervisory Service Also Considering Organizational Restructuring

[Asia Economy Reporters Sunmi Park, Jinho Kim] Financial authorities, which had previously ignored virtual currencies, are preparing to regulate and supervise by establishing dedicated departments and expanding personnel. On the 27th, the government assigned the Financial Services Commission (FSC) the tasks of managing, supervising, and improving the system for virtual currency operators, followed by the ruling party preparing a bill designating the FSC as the main regulatory body, which is seen as a preemptive measure.

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 said, "We have officially requested the Ministry of the Interior and Safety to establish a formal department," adding, "Considering the urgency of the recent virtual currency situation, 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.

Ruling Party’s Virtual Currency Bill Expected to Shift Control Tower from Office for Government Policy Coordination to FSC

The FSC’s request to establish a formal department reflects the judgment that the recent virtual currency issues will not be temporary, unlike in 2017. There have been consistent calls within the ruling party to bring virtual currency exchanges into the regulatory framework for control and management, and the government’s plan to impose taxes on virtual currencies starting next year is also cited as a background factor. Democratic Party lawmakers Lee Yong-woo, Kim Byung-wook, and Yang Kyung-sook argue for the necessity of financial authorities’ regulation since virtual currencies are effectively traded like financial products.

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 formally established. Their main duties include understanding the status of virtual currency exchange operators, preparing for registration, and future inspections.

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

A financial authority official said, "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’s approach to virtual currency work is decided."

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

Focus on Strengthening Virtual Currency Management System and Operator Oversight

Although specific tasks have not yet been finalized beyond the FSC’s responsibility for virtual currency management, supervision, and system improvement, 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 attentive to transparently disclosing registration application and acceptance status, as well as trading precautions, so that market participants can respond in advance to potential operator closures.

Lee Soon-ho, a research fellow at the Korea Institute of Finance, suggested in the report "Direction of Virtual Asset Regulatory Supervision" that "it is necessary to strengthen operator qualification requirements," and recommended "specifying the essential content and format that must be included in whitepapers issued when virtual currencies are launched, so that if the operator’s business does not proceed as stated in the whitepaper, responsibility can be held against the issuer and the handling business through institutional arrangements."