a month ago 3 min read

Under New Guidelines, South Korean Cryptocurrency Businesses will Need to Self-Regulate

SouthKorea-AltCoin-Cypto-CryptoNews

Following fresh recommendations released on Monday, South Korean securities companies and token issuers now have some clarification about the definition of security tokens.

The definition of security tokens by the Financial Services Commission of South Korea, which aligns the nation with other legal systems in the larger Asia area, is tokens that are digitalized utilizing distributed ledger technology.

According to this instruction, businesses must first control themselves. Angela Ang, a former official of the Monetary Authority of Singapore and senior policy consultant at blockchain intelligence company TRM Labs, said:

“South Korea's approach of tying the scope of security token offerings back to the definition of securities is broadly aligned with other regulators such as Singapore and Hong Kong.”

In South Korea's financial markets, the regulatory clarity "should foster digital asset innovation," according to Ang.

Traditional securities firms had been wary of entering the market prior to the guidance's release. Mooni Kim, an international lawyer at Kim & Chang, said:

“The basic stance that the securities law may apply to tokens was similar [to the U.S.]. The question of ‘How?’ always followed.”

Traditional financial participants who already possess securities licenses have already reacted. One of them is Shinhan Investment and Securities, one of the biggest securities firms in the nation, which has invited other firms to join an alliance in order to educate investors about the advantages of token securities and establish norms and best practices for issuance and trading.

A manager of a cryptocurrency exchange who requested anonymity to protect his ties with regional regulators. He claimed that he did not interpret the recommendations as an indication that the authorities were supporting the cryptocurrency sector.

“Securities firms seem to have some hope for it, but I don’t think it will impact our business that much,”
“Securities are already available on the securities market. Perhaps accurately defining the asset types should come first.”

He stated that he was awaiting the result of the United States. The Securities and Exchange Commission is suing Ripple once more. He does not want South Korea to adopt regulations earlier than the rest of the globe.

“It’s good for investors,” this executive said of the guidance, because the “Korea Securities Depository will control the total amount of issued assets and keep an eye on token issuers.”

Major cryptocurrency exchanges delisted Wemade last year after it was claimed that the South Korean gaming company misled investors about the quantity of Wemix tokens it had released.

Self-Assessment

Legislators will then modify important current laws to include security tokens. In the first part of this year, the National Assembly will be presented with regulatory proposals for changes to the Capital Markets Act and the Electronic Securities Act.

South Korea's regulators have worked to strengthen consumer protections after the UST stablecoin of the Terra system crashed last year. They have also developed a legal framework for the cryptocurrency business, which will eventually take the form of the Digital Asset Basic Act.

However, by self-regulating, businesses will be taking the first step. The guidelines mandate that token issuers, brokers, and other interested parties evaluate whether or not a token is a security.

According to Kim, cryptocurrency participants will need to examine their own classification and related tokens to see whether they need to apply to be regulated under the securities regime.

The process of getting licenses, which might take one to two years depending on the licenses and the business model of the organization, will be required of firms without securities-related licenses.

As companies and authorities come to an understanding of what constitutes a security and what does not, Ang anticipates increased discomfort.

Ang said:

“The FSC provides detailed guidance to help inform that decision and will likely assess each determination on a case-by-case basis.”
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