South Korea Continues Push For More Crypto Holdings Transparency

Updated: 13 July 2023

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The South Korean Financial Services Commission (FSC) has put forward a proposal which would require all firms in the country to disclose their crypto holdings from next year.

South Korea Unveils New Crypto Regulation

South Korea, renowned for its active cryptocurrency market, is taking a significant step towards enhancing transparency and regulation in the digital asset space.

The country’s financial regulator, the Financial Services Commission (FSC), has announced plans to mandate cryptocurrency firms to disclose their holdings starting in 2024.

JUST IN: South Korea to ask firms to disclose #crypto holdings from 2024.

— Amit Jaiswal (@TheAmitJaiswal) July 13, 2023

This move addresses concerns surrounding potential money laundering, fraud, and other illicit activities associated with cryptocurrencies.

The regulatory body has emphasized that domestic companies engaged in cryptocurrency activities will be required to provide comprehensive disclosure in accordance with new accounting rules.

Under the new regulations, companies will need to disclose detailed information concerning the quantity and characteristics of their cryptocurrency tokens.

South Korean firms will also be obliged to reveal their business models and internal accounting policies on the sale of cryptocurrencies and related profits.

The FSC’s draft specified that the reporting of cryptocurrency assets includes non-fungible assets utilizing distributed ledger technology or similar technologies and assets issued through cryptography.

Furthermore, the guidelines encompass security tokens, which refer to digitized securities as defined in the Capital Markets Act.

After evaluating relevant proposals, the FSC has approved the exposure draft bill, which introduces mandatory disclosure requirements for cryptocurrency.

This decision to enforce disclosure of crypto holdings is part of South Korea’s broader efforts to establish a robust regulatory framework for the digital currency market.

It comes at a time when cryptocurrencies have gained significant popularity among investors and consumers worldwide.

However, concerns have also grown regarding these decentralized assets’ lack of oversight and potential risks.

South Korea Follows Up on Recent Regulation

The rapid growth of the blockchain-based industry has led to a surge in trading virtual assets, particularly tokens.

However, the International Financial Reporting Standards (IFRS) have struggled to keep pace with market changes surrounding virtual assets.

To address this gap, the Korean National Assembly passed the Act on the Protection of Virtual Asset Users on June 30.

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— Colton_tez (@alan_ablePP) July 12, 2023

This legislation integrates 19 crypto-related bills and aims to safeguard virtual asset users.

Under this legislation, the Bank of Korea is granted authority to investigate crypto platforms. It also mandates insurance coverage, reserve funds, and proper record-keeping practices.

While assets like Bitcoin fall under its purview, tokens classified as securities are subject to existing capital market laws.

The legislation establishes definitions for digital assets and imposes penalties for various offenses, including using nonpublic information, market manipulation, and unfair trading practices.

Furthermore, the Financial Services Commission is entrusted with supervising crypto operators and asset custodians.

South Korea’s decision to require firms to disclose their crypto holdings reflects a broader global trend of governments and regulators seeking increased oversight of the cryptocurrency market.

As the cryptocurrency market continues to evolve and gain mainstream acceptance, more countries will likely adopt regulations to curb illicit activities and protect investors.