The FSC of South Korea wants to create a system that recovers fraudulently obtained funds, punishes criminals, and protects investors from future misdeeds.
The Financial Services Commission (FSC) of South Korea has released a paper laying out its new definition of cryptocurrencies, as well as proposed procedures for token issuers and penalties for non-compliance.
Individuals or platforms that mint non-art NFTs for trade, as well as decentralized finance projects, could face onerous regulations under the proposed guidelines.
The FSC proposed elements in the Act on the Protection of Cryptocurrency Users, which has been given to the National Assembly for consideration, according to a report released on Nov. 23.
It lays forth guidelines for token issuers who want their tokens to be sold on Korean exchanges, as well as potential penalties for individuals who the FSC deems are making “undue profit through market manipulation or trading on unreported information.”
The research begins with ICO operators, Decentralized Autonomous Organizations (DAO), and nonfungible token (NFT) minting services, which are all token-issuing firms (and potentially others.)
The FSC would require these companies to produce a white paper, have a positive rating from a reputable token evaluation service, have the project legal reviewed, and provide regular business updates to users.
Previously, the FSC did not consider NFTs to be regulated assets, but that judgment was reversed earlier this week. Privacy tokens like Monero (XMR) and stablecoins like Tether (USDT) are also considered cryptocurrencies, although central bank digital currencies (CBDC) are not.
Failure to follow the guidelines might result in a sentence of at least 5 years in jail, as well as a fine of three to five times the amount of “unfair profit” made. Any profit produced while the enterprises were breaking the law would be considered unfair profit. These penalties are similar to those imposed under the current Capital Markets Act.
The proposed suggestions are in response to what the FSC believes are flaws in the Special Reporting Act’s ability to adequately protect investors. The Act is the legislation that forced most of the country’s crypto exchanges to close owing to severe operating restrictions.
Proposals were apparently positive, according to a well-connected exchange sector insider:
“The new law, once passed, will further promote industry development and help protect digital asset investors.”
