South Korea to Prioritize Innovation in Next Phase of Crypto Regulations

South Korea’s authorities have expressed a commitment to balance investor protection with fostering technological innovation in the next phase of crypto regulations.

Kim So-young, Vice Chairman of the Financial Services Commission, emphasized the need for regulations to strike this delicate equilibrium during a recent conference in Seoul on digital currencies.

This shift in focus comes in the wake of the South Korean government and central bank’s collaboration with the International Monetary Fund (IMF) following the Bank of Korea’s October project launch to develop a wholesale central bank digital currency (CBDC).

New Regulatory Framework to Come into Effect From Next Year

Reflecting on the regulatory journey in South Korea, authorities had enacted legislation earlier in the year to bring virtual assets under regulatory control, aimed at ensuring investor protection. This regulatory framework is slated to take effect from July 2024.

The move towards regulation followed a series of cryptocurrency-related issues in recent years, including an alleged fraud case involving South Korean crypto entrepreneur Do Kwon. These incidents heightened concerns among both the public and regulators regarding the need for oversight in crypto markets.

NFTs Not Subjected to Same Regulations as Crypto

As reported earlier, South Korean financial regulators had previously clarified their stance on non-fungible tokens (NFTs), stating that they would not be subject to the same rules as traditional crypto assets. This ruling, coming after the establishment of separate regulations for central bank digital currencies, signifies an evolving approach to various forms of digital assets within the country.

During the same conference, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), called for the establishment of explicit guidelines and robust infrastructure on a global scale. Georgieva cautioned that without clear regulations and a strong foundation, cryptocurrencies might pose a threat to macro-financial stability in the long run.