South Korea: Crypto Can Be Subject to Capital Markets Law

In Brief

• FSS governor indicated that virtual assets could form a part of the capital law.
• Lee Bok-hyun said that "if certain qualifications are met, it can be judged as securities."
• In 2017, the FSS said that it would not regulate crypto trades as it did not regard them as currencies.

The governor of the South Korea Financial Supervisory Service (FSS), Lee Bok-Hyun, has indicated that virtual assets could form part of the country’s securities and capital markets law.

Mr Lee said at a press conference, “I disagree with the view that some virtual assets do not have parts that can be recognized as financial investment products or securities.”

How will crypto be judged?
The official further added that as a lawyer or someone in charge of financial matters, he thinks that “if certain qualifications are met, it can be judged as securities,” he continued by stating “materials are available.”

Meanwhile, local media reported that the director had given the prosecution information about their investigation into the TerraLuna collapse, including virtual asset securities judgment.

The latest view from the regulator contrasts with its stance in 2017. Around that time, the Financial Supervisory Service of South Korea stated that it did not regard Bitcoin and other cryptocurrencies as currencies and would not regulate their trade further.

However, last month, South Korean prosecutors searched the residence of Terraform Labs co-founder Daniel Shin to investigate any criminal activity. Meanwhile, the Seoul court has issued a warrant for the arrest of Terra co-founder Do Kwon and five other executives.

As the Terra collapse triggered action by domestic authorities, President Lee also clarified how the prosecution and financial authorities might judge the attributes of securities.

He emphasized, “In the end, if the requirements are met, I think that if the authorities have the authority to make judgments not only through the interpretation of laws and regulations or systems but also at specific legal institutions, I think that judgment can be made.

“However, we had every reason to be cautious,” he said.

South Korea moves into Web3 while regulating the sector
To encourage the growth of the metaverse, members of South Korea’s ruling party are drafting a Metaverse Industry Promotion Law, Be[In]Cryptoreported recently.

Following this, South Korea’s Ministry of Science and Information and Communication Technologies (ICT) released the first set of ethical principles for the metaverse.

Last month, authorities also said that a gift tax would be imposed on cryptocurrency airdrops within a tax bracket of 10% to 50%.

Notably, South Korea is amid regulatory changes as new players enter the crypto and metaverse markets.

The series of changes followed as the current president of South Korea, Yoon Suk-yeol, voiced his intent to allow the crypto sector to grow while overturning the initial coin offering (ICO) ban in the country earlier this year.

On Aug. 29, the Bank of Korea also published a domestic paper on the “European Union Crypto Asset Market Act (MiCA)” and argued in favor of allowing ICOs in the country.

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