The FSC seeks to build a framework that will allow for the recovery of fraudulently obtained money, the imposition of criminal penalties, and the protection of investors against future wrongdoing.
The Financial Services Commission (FSC) of South Korea has released a paper describing its new definition of cryptocurrency, as well as recommended processes for token issuers and penalties for non-compliance.
Individuals or platforms that mint non-art NFTs for trade, as well as decentralised finance initiatives, might face onerous restrictions under the proposed guidelines.
The FSC’s Nov. 23 report includes the topics it requested for inclusion in the Act on the Protection of Cryptocurrency Users, which has been sent to the National Assembly for consideration.
It establishes guidelines for token issuers seeking to have their tokens traded on Korean exchanges and suggests sanctions for anyone found to be profiting “unfairly” through market manipulation or trading on hidden information by the FSC.
The paper begins with an examination of token-issuing enterprises, which include initial coin offerings (ICO) operators, Decentralized Autonomous Organizations (DAO), and nonfungible token (NFT) minting services (and potentially others.)
The FSC would require these firms to produce a white paper, acquire a positive rating from a recognised token assessment service, have the project reviewed by a legal professional, and provide regular business updates to users.
Previously, the FSC did not consider NFTs to be regulated assets, but that judgement was reversed earlier this week. Additionally, it classifies privacy tokens like as Monero (XMR) and stablecoins such as Tether (USDT) as cryptocurrencies, but not central bank digital currencies (CBDCs).
Failure to follow the guidelines would result in a minimum of five years in jail and a fine of three to five times the amount of “unfair profit” earned. Unfair profit is defined as profit earned when enterprises were operating in violation of the law. These penalties are similar to those outlined in the current Capital Markets Act.
The proposed suggestions are in reaction to what the FSC determined to be inadequacies in the Special Reporting Act’s capacity to safeguard investors completely. The Act is the law that forced the closure of the majority of the country’s cryptocurrency exchanges owing to the Act’s stringent conditions for continued operation.
According to a well-connected source in the exchange sector, the ideas were positive: “Once enacted, the proposed regulation would further stimulate industrial growth and safeguard investors in digital assets.”
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