South Korea has embarked on a process to legislate a new law that will regulate the sizzling cryptocurrency market to protect virtual coin investors, a move that is expected to institutionalize crypto investment in the country.
On Tuesday, the Financial Services Commission (FSC) submitted a report to the National Assembly on the basic direction and issues regarding a potential rule on the protection of cryptocurrency users. The report was presented by the FSC as a draft reference for legislative discussions at the National Assembly based on some 10 bills that have so far been proposed.
According to the report exclusively obtained by Maeil Business Newspaper on Tuesday, the financial regulator has decided to enact a new statute dedicated to controlling cryptocurrency platforms instead of amending the Act on Reporting and Using Specific Financial Transaction Information.
This is the Korean government’s first attempt to legislate a crypto market-dedicated law. The decision comes in response to criticism that the current law has many loopholes in regulating crypto trading because it is designed to govern cryptocurrency exchanges and transactions only for anti-money laundering purposes.
In addition, a certain level of self-regulatory authority will be granted to an industry association in the private sector, but the financial authorities will retain the minimum necessary supervisory authority for prompt action, such as the right to order correction. And a law enforcement system will be established to recover illegal economic profits along with criminal sanctions for unfair practices.
Specifically, a similar level of sanctions stipulated in the Capital Market Act could be applied to unfair transactions such as the use of undisclosed material information, price manipulation, and illegitimate trade. For example, five-year or longer-term imprisonment would be imposed for ill-gotten gains of over 5 billion won ($4.2 million), three-year or longer-term imprisonment for between 500 million won and 5 billion won and less than one-year jail sentence for less than 500 million won. In addition to the jail term, the fine is three to five times the amount of the unfair profit regardless of its size.
Market analysts expect the new legislation to put the cryptocurrency industry under the institutional system like banking and insurance industries. This means cryptocurrency will be positioned as an asset recognized by authorities and be subject to regulatory supervision and enforcement.
By Yoon Won-sup and Minu Kim
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]