South Korea is unlikely to push out crypto regulation before the US, says the authority
This comes as South Korea’s Financial Services Commission (FSC) recently expressed concern over the country’s ambitious new cryptocurrency legislation currently under development.
“There may be a sense of urgency because [concerns over] regulatory void, but it is important to create a regulatory framework that has international consistency, said Park Joo-young of the FSC’s Financial Innovation Division, according to local media.
“Until international consistency is achieved, it will be difficult for [Korea] to create a regulatory system in solitude,” Park said.
At least when it comes to central bank digital currencies (CBDCs), international cooperation is a key determinant of reaching the maximum potential of such projects, a Bank for International Settlements (BIS) report said in July. Central banks that are not actively exploring CBDC should consider cross-border functionality at an early design stage, the report says.
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The comments by Park on Monday, which came during the National Assembly’s policy discussion on initial coin offerings (ICOs), challenge South Korean President Yoon Suk-yeol’s initiative to institutionalize digital currencies quickly.
Yoon’s administration reportedly plans to have the legislation by next year, set to take effect in 2024.
However, the FSC representative explained that it is difficult to start building the framework as the bill is not even finalised; mentions that there are 14 bills related to cryptocurrencies remaining in the National Assembly.
“MiCA (Markets in Crypto-Assets) has not yet been finalized and is expected to take one and a half to two years to come into force, and the US also does not have the relevant regulation,” Park said.
Park further explained that without international consistency, various problems can arise, such as regulatory arbitrage by crypto firms that use loopholes in a particular country’s laws to operate there, ultimately harming the interests of investors not only in South Korea, but globally.
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South Korea, where around one in ten citizens are crypto users, has seen a greater amount of discussion surrounding the promotion of cryptocurrencies since the country elected Yoon as president in May.
Yoon has promised to allow ICOs, which have been banned by the FSC in 2017, and a new regulation on crypto tentatively called the Fundamental Act for Digital Assets in Support of Crypto.
The law, which follows Korea’s anti-money laundering restrictions on crypto exchanges last year, is likely to be designed around holding stricter standards for token issuers and crypto developers to protect users and prevent a repeat of the multibillion-dollar Terra-LUNA debacle.
