Practical Monitoring Criteria Include ISMS Certification and Real-Name Account Verification
Financial Services Commission Waits Until September 24 Despite Occurring Damage
Need for Strong Regulations Comparable to Japan's White List System
[Asia Economy Reporter Gong Byung-sun] Although the Financial Services Commission (FSC) has begun to take responsibility for regulating the cryptocurrency market, there are still criticisms that its involvement is only superficial. Opinions are also being raised that a strong level of cryptocurrency market regulation, similar to that of Japan, is necessary.
According to financial authorities on the 7th, the Financial Intelligence Unit (FIU) under the FSC presented recommendations at a meeting with cryptocurrency exchanges on the 3rd, urging them to reflect trader protection measures in their business promotion plans and to report accordingly. It is expected to include methods for exchanges to identify high-risk customers and monitor the market themselves, as well as procedures and standards for the exchanges’ own cryptocurrency listings. The meeting reportedly involved 19 exchanges certified with the Information Security Management System (ISMS) and one electronic wallet company.
The meeting was a follow-up measure to the “Virtual Asset Transaction Management Plan” announced on the 28th of last month. The plan prohibits wash trading and internal trading by executives and employees at cryptocurrency exchanges. Wash trading refers to the practice where the same investor places both buy and sell orders to inflate trading volume. Trading of cryptocurrencies issued by the exchanges themselves is also banned.
However, there are still criticisms that the FSC is shirking responsibility. Most measures are being prepared independently by the exchanges themselves. The actual standards the FSC monitors remain limited to ISMS certification and real-name account verification. Even the real-name account verification is evaluated by banks, so the FSC does not directly oversee it.
Another issue is that the FSC is inactive until the exchange registration deadline on September 24. Although it has announced that it will expedite reviews to encourage early registration by exchanges, damages are already occurring. On the 31st of last month, victims of a multi-level scam involving the cryptocurrency exchange V Global announced plans to file a class-action lawsuit. The damage amount is 3.85 trillion won, which is larger than the total damage of 1.7083 trillion won that occurred from 2017 to April of this year. If scams related to exchanges that have not yet surfaced come to light, even greater damages are expected.
Therefore, opinions are being raised that the FSC should intervene more actively and enforce regulations. A representative example is Japan’s whitelist system, which is emerging as a way to regulate the cryptocurrency market. In Japan, the Financial Services Agency takes a leading role by verifying cryptocurrencies and allowing transactions through a registration system. Due to the ambiguous nature of the cryptocurrency market, if only registration standards are surpassed, the scope of monitoring becomes too broad, so the government actively intervenes. Currently, only 12 types of cryptocurrencies are traded on Japan’s largest exchange, BitFlyer. In contrast, 178 types of cryptocurrencies are traded on Korea’s largest exchange, Upbit.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
