South Korea's financial regulatory body, the Financial Services Commission (FSC), has put forth proposed amendments that would mandate regulatory approval for new executives joining cryptocurrency projects before commencing their roles at cryptocurrency companies. The proposal, unveiled on February 5, outlines substantial changes to the reporting requirements for virtual asset service providers (VASPs). The intended outcome is to empower the FSC to screen executives entering cryptocurrency companies, making it mandatory for these firms to report any personnel changes to financial regulators. Under the proposed regulations, executives cannot assume their roles until the FSC approves their personnel change reports.
The amendment, anticipated to take effect in late March 2024, is subject to various processes, including review by the government's Legislative Department and resolution by the Financial Services Committee. Once the revisions are finalized, the rule is expected to be applicable to VASP update reports submitted in the latter half of 2024. Moreover, the proposed regulation could impact a company's ability to renew its VASP license, as it grants the FSC the authority to halt the review of a VASP license registration if the personnel are under investigation by local or international authorities.
Public feedback on the proposed amendments is being sought by South Korean regulators, with a comment period open until March 4. The move towards stricter regulations on the country's cryptocurrency sector aligns with a broader trend of regulatory tightening. In mid-January, reports indicated that South Korea's financial intelligence unit was working on legislation addressing cryptocurrency mixers, aiming to introduce regulations similar to those in the United States to curb money laundering activities associated with cryptocurrency mixers.
Concerns about potential illegal fund outflows and money laundering prompted the Financial Services Commission to express reservations in early January. Specifically, the regulator highlighted risks when South Koreans acquire cryptocurrencies from foreign exchanges. On January 3, the regulator issued a legislative notice proposing amendments to credit finance laws, seeking to prohibit locals from using credit cards for cryptocurrency purchases.
