By Anna J. Park
The parliament is set to deliberate on a bill that stipulates cryptocurrency exchanges’ obligations for investor protection as early as later this month, as rival parties share a common understanding about a need to legalize the country’s growing digital asset markets.
According to the parliament and coin industry insiders, the National Policy Committee ― a sub-committee of the National Assembly that supervises the financial sectors and financial policies ― is expected to hold its committee meeting on reviewing bills on Nov. 29, although the date is not completely fixed as of now. If the review committee meeting is held on Tuesday as expected, a bill on digital assets is highly likely to be reviewed at the meeting.
Once the actual review of the bill is implemented by the parliamentary committee, it is forecast that the bill would be able to pass the legislative procedures quickly, as rival parties, as well as the government, do not seem to have major differences on the bill. Also, both the parliament and the government are under pressure to strengthen cryptocurrency investor protection, following the recent FTX fiasco. The blowup of the major cryptocurrency exchange in the U.S. brought attention to the need to speed up legislative procedures to regulate the local digital asset markets.
The digital asset bill proposed by ruling party lawmaker Rep. Yun Chang-hyun puts the priority on legalizing cryptocurrency exchanges’ duty to investor protection. The bill obliges coin exchanges to prepare ample reserves, while also requiring the exchanges to separately manage digital assets held by investors, as a move to prevent any arbitrary misuse of consumer assets by coin exchanges.
The bill also includes a broad definition of a digital asset, which prescribes a non-fungible token (NFT) as part of the definition of digital assets. The bill also stipulates the obligation on the part of crypto exchanges to be insured in case of unexpected financial damage.
Financial Services Commission (FSC), a key financial regulator in the country, submitted its opinion on the bill to the parliament last week.
Currently, financial authorities’ only regulation imposed on the local cryptocurrency asset sector is that only coin exchanges that completed registration with the government by September last year could continue operating in the country. As the registration obligation provided a minimum level of duty on the part of crypto businesses, there has been a call for thorough legislation across the growing digital asset industries.
Yet, even if the bill is passed, more legislation is still needed since the bill is mainly focused on investor protection, and is lacking specific regulations on various crypto businesses. Industry insiders of the cryptocurrency sector have been asking the government to make detailed laws that prescribe specific duties and obligations, ranging across listing, disclosure, business qualifications, regulation on advertisements and fiduciary duties.
Both the ruling party and the government plan to bolster the legislation in the following years, after passing the basic bill on digital assets as early as possible.