• The Financial Services Commission (FSC) of South Korea published rules outlining which digital assets will be regulated as securities in the country.
• Assets that fit into this category are those used for staking to derive dividends and assets like stablecoins fall outside this category.
• South Korea has been actively engaging in the crypto ecosystem, with plans to build the world’s first decentralized digital commodity market and launch a ‘virtual currency tracking system’ to curb money laundering.
South Korean Regulatory Body Publishes Security Token Guidelines
The Financial Services Commission (FSC) of South Korea published rules on January 6th 2021 outlining which digital assets will be regulated as securities in the country. According to these guidelines, all blockchain-based tokens that have characteristics that fit them into the country’s capital market act will be treated and regulated as securities, while assets such as stablecoins will operate following upcoming digital asset regulations.
Assessment of Crypto-Related Financial Assets
The FSC stated that cryptocurrency and other digital asset security-like financial assets will be assessed on a case-by-case basis and issuers and brokers, such as crypto exchanges, will be held accountable for evaluating them according to such rules. These new guidelines support innovation while ensuring consumer protection at the same time.
Korea’s Supportive Disposition towards Crypto
South Korea has been one of the countries with robust engagements in the cryptocurrency ecosystem. The government has allocated four billion Korean won to develop a blockchain-based virtual power plant; during a national assembly policy discussion on Initial Coin Offerings (ICOs), it was highlighted that an internationally consistent crypto regulatory framework is needed; Busan declared it would build the world’s first decentralized digital commodity market by H2 2023; and recently, the Ministry of Justice announced its plan to launch a ‘Virtual Currency Tracking System’ for money laundering prevention purposes.
Timeline for Legalization
The first half of 2023 is expected to focus more on promotional activities and institutionalization through submitting drafted guidelines for assessments ahead of proposed legalization of cryptocurrencies in South Korea.
These new security token guidelines from FSC are an important step towards establishing an effective regulatory framework for cryptocurrencies in South Korea, promoting innovation while simultaneously ensuring consumer protection. The timeline for legalizing cryptocurrencies is expected to begin during early 2023.