FSC Mandate: Interest for Digital Asset Investors
The Financial Services Commission (FSC) in South Korea issued a notice emphasising the obligation for investors in digital assets to receive interest on their deposits into exchanges by July 2024. Notably, the guidance excludes nonfungible tokens (NFTs) and central bank digital currencies (CBDCs) from this regulation.
Exclusion Clarity and Exception Parameters
Although the FSC plans to release legislative guidance on 10 December, it’s clarified that NFTs and CBDCs fall outside the purview of this directive. However, there’s a provision for exceptions. Tokens classified as NFTs but functioning as a payment method and issued in substantial quantities might fall under virtual asset classification, becoming eligible for interest when deposited into exchanges.
Operator Guidelines and Asset Separation
Aside from asset classification, the regulator outlined protocols for handling user deposits by virtual asset operators. Exchanges are mandated to segregate user deposits from their own assets, entrusting them to a bank. Furthermore, the directive requires 80% of the coins to be stored in a secure cold wallet.
Security Measures and Prohibitions
The forthcoming guidance includes stringent requirements for preparing against hacks or computer incidents. Virtual asset service providers are mandated to obtain insurance or amass reserves. Additionally, the law prohibits blocking deposits or withdrawals except under compelling circumstances, such as court orders or regulatory directives.
Strengthened Regulatory Measures
South Korea has been bolstering its regulatory framework in the crypto space. Recent efforts involved urging users to report unlicensed crypto exchanges operating within the region. Spearheaded by the Digital Asset Exchange Association and the Financial Intelligence Unit of South Korea, this initiative aims to reinforce compliance and oversight.
Balancing Security and Innovation
This development underscores South Korea’s commitment to fostering a secure environment within the crypto sphere while striving to strike a balance between regulatory safeguards and technological innovation. The evolving landscape reflects a proactive stance toward mitigating risks associated with digital assets while maintaining a conducive ecosystem for their legitimate use and development.