The South Korean Financial Services Commission (FSC) has announced significant legislative amendments aimed at tightening regulations surrounding virtual asset business operators, specifically focusing on the accountability and duties of crypto executives.

The partial amendment to the Enforcement Decree of the Act on Reporting and Use of Specific Financial Transaction Information, under Finance Commission Notice No. 2024-30, introduces measures to ensure greater compliance and oversight in the rapidly evolving virtual asset sector.

Screening executives

Central to the proposed changes is the introduction of stringent requirements for changes in the management of virtual asset businesses.

Under the new regulations, any alteration in the representative or executive positions within such businesses must be reported and approved before the new appointees can officially assume their roles.

This measure is designed to prevent disruptions and maintain a steady hand at the helm of these often volatile and technologically advanced entities. The government aims to foster a more stable and trustworthy environment for businesses and consumers by holding leaders within the virtual asset industry to higher accountability standards.

Other amendments

The amendment also introduces several other modifications to enhance the regulatory framework for virtual assets. It simplifies the reporting processes for virtual asset businesses by setting up pre-reporting and post-reporting mechanisms, potentially exempting certain changes from undergoing a comprehensive review.

Additionally, financial institutions must meet more stringent criteria when issuing real-name accounts to virtual asset operators, including proving their capability in human and infrastructural resources and adhering to due diligence and legal compliance.

Furthermore, the amendment outlines procedures for the suspension and subsequent resumption of report reviews when there are delays in verifying necessary facts. It also defines conditions under which authorities can cancel reports without prior notice, especially when a financial transaction order is significantly disturbed due to legal violations or misconduct by executives.

The Financial Services Commission seeks public input on the amendment until March 4, 2024. This open consultation period reflects the government’s dedication to transparency and stakeholder engagement in the legislative process. Individuals and organizations are encouraged to review the proposed changes and submit feedback, contributing to a more inclusive and well-rounded regulatory framework.