• South Korea’s FSC forms a Virtual Asset Committee to review spot ETFs and corporate account regulations.
  • The new committee will address market anomalies and tighten investor protections in the cryptocurrency space.
  • South Korea’s Virtual Asset Committee will tackle structural issues, aiming for better market regulation.

The South Korean Financial Services Commission (FSC) is setting up a Virtual Asset Committee to address critical cryptocurrency concerns. The committee will discuss the approval of spot ETFs and the use of corporate virtual accounts. 

Previously, the FSC banned Bitcoin and other virtual asset ETFs due to a lack of underlying assets. It also restricted corporate virtual asset accounts, citing money laundering risks.

According to News1, the Korean Virtual Asset Committee will be established this month and plans to hold its first meeting as early as this month to discuss issues such as the approval of virtual asset spot ETFs and corporate virtual asset investments. https://t.co/t6SYm9Ec6R

— Wu Blockchain (@WuBlockchain) October 14, 2024

South Korean Committee to Tackle Market Irregularities

The committee will be led by the Vice Chairman of the FSC . It will consist of 15 members from various departments, including finance, economy, legal, and technology. Moreover, private sector representatives will join the group. 

These experts will include legal professionals, virtual asset specialists, and consumer protection advocates. Hence, their role is to ensure that the committee incorporates feedback from the market.

Market Monitoring and Anomalies

Additionally, the FSC is monitoring market anomalies to protect investors. The committee will also focus on further regulatory improvements. According to CryptoQuant CEO Ki Young Ju, if spot ETFs and corporate virtual accounts are approved, this could attract arbitrage funds and market makers. Consequently, this would help mitigate the kimchi premium effect, where cryptocurrency prices in South Korea are higher than global markets.

The committee’s first meeting is expected soon. Besides this, they will address structural problems in the virtual asset market. The FSC is also reviewing possible changes to cryptocurrency legislation.

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Regulatory Tightening and Industry Oversight

In July, South Korea enforced the Virtual Asset Users Protection Act to toughen rules around virtual assets. This law requires virtual asset service providers to report illegal transactions to the FSC. 

It imposes strict penalties, including life imprisonment for unlawful gains exceeding 5 billion won ($3.7 million). Additionally, virtual asset businesses must secure insurance or reserves to cover liabilities in case of cyberattacks or system failures.

During a recent audit, lawmakers raised concerns about Upbit, the largest cryptocurrency exchange in South Korea. Currently, Upbit controls 70% of the market. Therefore, the FSC acknowledged the issue and committed to addressing market monopolies through the new Virtual Asset Committee.

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