The South Korean government will step up the launch of a new regulatory body to police the crypto sector – and could fast-track its creation as a direct response to what it has dubbed the “terra (LUNA) incident.”
In an exclusive article, Newspim reported that the body, to be named the Digital Assets Committee (literal English translation), will be launched “as early as next month.”
The committee will operate separately from the existing Financial Services Committee (FSC) and the Financial Supervisory Service (FSS), the country’s two top (tradfi) financial regulators. The FSC and its Financial Intelligence Unit (FIU) currently police the sector. The FSC deals with the sector in general, and helps form policy, while the FIU polices crypto exchanges.
The new committee would likely be one of the first dedicated crypto regulatory bodies in the world, and will likely take sole responsibility for controlling the sector – although the handover of power from the FSC and FIU may be done in a phased manner.
The media report, quoting sources from the People’s Power Party – the party of President Yoon Suk-yeol – explained that the body “is expected to become a control center for policy creation and the supervision of the cryptoasset industry.”
The committee’s work will also center on the creation of the so-called Digital Assets Framework Act. This draft law, which is still in its formative stages, is Yoon’s brainchild, and will likely contain a large set of crypto-specific rules, as well as a number of pro-crypto business measures.
The creation of a regulatory agency of this size will also require no shortage of legislation, which will likely be forthcoming in the months ahead. Instead – the new committee will likely function on a temporary basis until its existence can be enshrined into law.
An official from the party was quoted as stating that the Digital Assets Committee would be “launched immediately” once Yoon had appointed a new Chair of the FSC.
The media outlet added that the party had “decided to launch the Digital Assets Committee hastily” as a result of the LUNA incident.
The party says that it hopes the body will help “minimize market confusion and enhance policy effectiveness” by “unifying the system of the departments currently in charge of sector.”
As well as the FSC and the FIU, other bodies – such as the finance ministry, the science and ICT ministry, and the Personal Information Protection Committee – currently govern certain aspects of the crypto industry.
The Digital Assets Commission is expected to create guidelines for the crypto exchange industry, and will reportedly focus on the following areas:
- listing/delisting criteria
- token monitoring and warning systems
- the monitoring of “unfair” trading practices and insider trading
- transparency and disclosure
- investor protection measures.
ICOs back on the table
The committee’s launch will also bring some positive news for the sector, however – with the party suggesting that “the schedule for legalizing initial coin offerings (ICOs)” could be accelerated.
Token launches in all their forms have been outlawed in South Korea since 2017. While the golden era of ICOs has been and gone, scores of large companies are keen to launch their own coins – including the conglomerate SK, which is already advancing quickly with its own token launch plans.
But the government is likely to ask the new committee to focus on potential amendments to the existing Specific Financial Transaction Information Act in the short term. Such amendments would likely focus on “investor protection”-related measures.
An official from the party was quoted as stating:
“Currently, existing [crypto sector legislation] is limited in terms of regulations, and focuses on business obligations and money laundering-related issues.”
The same unnamed official added that a new FIU director would likely be appointed shortly after the new FSC chief had been put in place.
Critics, including leading academics, have repeatedly called for the government to create a “ministry-level” body capable of governing the sector.
Last week, the nation’s top five exchanges announced they were forming a joint response council in the wake of the LUNA incident – and the party sources stated that the commission would likely consult with this new body in some capacity.
The exchanges were criticized by politicians and media experts for their lack of a coordinated response to the crash – with some delisting LUNA and other Terra coins almost immediately, and others only making their delisting announcements late last week.
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