The Bank of Korea gains authority to scrutinize domestic crypto firms, accessing transaction data amid ongoing virtual asset regulatory discussions.

The Bank of Korea (BoK) recently got the authority to scrutinize domestic cryptocurrency service providers and issuers more closely. This news, covered by The Korea Herald on April 20, highlights the central bank’s growing role in overseeing digital currency enterprises as South Korea continues to debate regulations surrounding virtual assets.

In the past, the Bank of Korea and South Korea’s primary financial regulator, the Financial Services Commission (FSC), have had disagreements over jurisdiction in the crypto industry. With the BoK now authorized to investigate, both institutions will have the ability to inspect cryptocurrency operators and review transaction data. Despite the central bank’s expanded powers, the FSC will retain the final decision-making authority in regulating the digital asset sector.

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Bank of Korea Addresses Concerns Surrounding Stablecoins

The Bank of Korea has expressed apprehensions about possible risks to financial stability stemming from stablecoins. Consequently, the central bank can now obtain transaction data from cryptocurrency exchanges, allowing for a more comprehensive monitoring of the market. An official from the National Assembly’s Political Affairs Committee confirmed this development last week.

The FSC will share its official position on the subject during a subcommittee meeting on April 25. The meeting’s outcomes can potentially accelerate the enforcement of South Korea’s virtual asset regulations, as reported.

Dispute Between BoK and FSC over Crypto Regulations

Efforts by the South Korean government to advance cryptocurrency regulations have been hindered by a power struggle between the Bank of Korea and the Financial Services Commission. Democratic Party lawmaker Kim Han-gyu, who proposed the country’s Crypto Assets Act, stated that the FSC recognizes the necessity for the BoK to have access to data but is unwilling to incorporate this element into the legislation.

The FSC has warned that if the central bank were to regulate cryptocurrencies, it could inadvertently suggest that digital assets have the same standing as traditional finance. The FSC’s chair previously stated that cryptocurrencies are not financial assets.

Ongoing Struggle for Crypto Regulatory Control

For the past three years, the Bank of Korea and the Financial Services Commission have been engaged in a tug-of-war over the regulation of cryptocurrencies. The Political Affairs Committee, a branch of South Korea’s State Affairs Commission, has accused the FSC of attempting to monopolize its role as the exclusive crypto regulator.

Despite these conflicts, the FSC has been assertive in its enforcement actions against cryptocurrency companies. Its perspective on crypto assets is in line with that of the United States Securities and Exchange Commission, which classifies them as securities. Furthermore, the Financial Supervisory Service, a subsidiary of the FSC, established the Digital Assets Committee in mid-2022. This investigative body strives to monitor the industry more closely.

As the debate over virtual asset legislation continues in South Korea, the Bank of Korea’s newly acquired authority to investigate local cryptocurrency firms sparks more debate in the nation’s approach to regulating the digital asset sector. 

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Filed under: Bitcoin - @ April 24, 2023 8:28 am