South Korea's regulators undertake a regulatory framework that supports investor protection

 

South Korea's regulators undertake

a regulatory framework that supports investor protection

Months after the enactment of the Virtual Asset User Protection Act, South Korean regulators address the absence of a framework to guide the law's implementation.

The country's

Financial Control Service (FSS) says

It will deploy resources to introduce a new regulatory framework

to uphold the law before it comes into force.

FSS President Lee Bok Hyun revealed to Parliament that the framework will be launched before July 2024 and will pay particular attention to the complexities of the local digital currency ecosystem.

While the law imposes criminal liabilities on industry operators, analysts are of the view that its provisions did not confer strong enforcement powers on regulators.

Future regulations

will provide for the issuance

listing and distribution of cryptocurrencies. Most importantly

the Financial Supervisory Authority will push for the establishment of

a "supervision and inspection system"

for cryptocurrency providers to protect investors.

FSS says it will not introduce legislation on its own but will interact with DAXA, a self-regulated entity with the country's largest exchanges.

"If there is indeed an act that amounts to manipulating the volume of distribution through hedging or unfair disclosure, we will consult with Daxa," Lee said.

"There are relevant regulations in the securities sector for various checks related to the issuance market, but no relevant systems in Daxa or individual exchanges."

Lee's remarks follow an investigation into the operations of the Financial Supervisory Authority conducted by the Political Affairs Committee of the South Korean National Assembly.

The ensuing criticism that

the population was draining money from investing in "burger currencies" cryptocurrencies issued abroad but which could be traded in South Korea.

Min Pyong Duke of

the Korean Democratic Party said:

Local investors suffer heavy losses as local virtual asset exchanges

listed burger currencies in large numbers and allowed prices to fall afterwards.

The President of

FSS pledged to protect investors from losses arising from investment

in Burger Coins using the proposed regulatory framework.

South Korea's rush for legislation protecting investors stems from Terra's catastrophic collapse, resulting in losses of up to billions of dollars.

A wave of

regulatory activity in South Korea

Since Terra's collapse, South Korean authorities have been pushing through

a barrage of regulations to eliminate bad actors in the sector.

The rules

which primarily target service providers

provide for disclosure and separation of property funds from clients

and a contingency plan against black swan events such as hacks.

By pushing the limits of regulations, the new rule system requires political office holders to disclose their digital currency holdings to enhance transparency.

Regulators such as FSS and the Financial Services Commission (FSC)

are expected to make similar disclosures as the country moves

away from the horrors of Terra's collapse.