Korean gov’t clarifies crypto regulatory roles of different agencies

Over the past year or so, the crypto community in South Korea has had to adapt to a suite of new regulations and government frameworks tailored to the growing industry.

With the regulatory landscape for digital assets thus undergoing a marked shift, there has nonetheless been some confusion as to which Korean government agency or regulatory authority is tasked with overseeing various aspects of crypto-related activities. According to a local report, a joint statement released on Friday aims to clarify these questions for a society of undeniable crypto enthusiasts.

The statement outlines that the Financial Services Commission, or FSC, will be tasked with monitoring digital asset businesses, establishing regulations for the sector and ensuring the implementation of strong Anti-Money Laundering measures by crypto firms. 

Notably, the current head of the FSC, Eun Sung-soo, has recently fallen out of favor with the crypto community due to his disparaging remarks about the asset class and denial that authorities are necessarily obliged to protect investors just because of crypto’s local popularity.

As the Friday report notes, Sung-soo has since backtracked somewhat by claiming that those investors who transfer their holdings to crypto firms that are registered with the authorities will be protected by the government. Nonetheless, the joint statement has emphasized that personal responsibility remains paramount, given that crypto is still not recognized as a currency or financial product in South Korea:

“No one can guarantee its value, and there is a risk of massive losses due to the volatile exchange environment at home and abroad.” 

In addition to the FSC, the Finance Ministry, Fair Trade Commission and National Tax Services, and Korea Customs Service will each be tasked with overseeing specific areas of crypto regulation and supervision. Moreover, all crypto businesses — among them, custodians, exchanges and brokerages — are required to have registered with the Korea Financial Intelligence Unit by Sept. 25. Failing to do so runs the risk of a penalty of up to five years in jail and a 50-million-won (roughly $45,000) fine.

Among the new rules for crypto users are the imposition of a 20% tax on Bitcoin (BTC) and cryptocurrency profits that exceed 2.5 million won, or roughly $2,250. The tax law will come into force, starting Jan. 1, 2022. Crypto business operators are also required to use real-name accounts at banks. Of the 60 exchanges estimated to be active in the country, only four — Upbit, Bithumb, Korbut and Coinone — are doing so, according to the government. A further 20 have been certified by the Korea Internet & Security Agency for information security management systems.