[Global Crypto Assets & Finance Conference 2021] “Recent Regulatory Trends for Virtual Assets”_Lee Hae Boong, Advisory at Financial Supervisory Service

Session 3: Crypto Asset related Systems and Regulations

▣ Recent Regulatory Trends for Virtual Assets_ Lee, Hae Boong Advisory at Financial Supervisory Service

Hae Boong Lee, Vice President of the Financial Supervisory Service, made a presentation on trends and ways forward related to the major issues that are bringing digital/crypto assets into the regulatory domain. Among the topics that are bringing digital/crypto assets into the regulatory domain, he said, especially the security protection and storage of assets, trends related to so-called stablecoins, including global stablecoins, regulatory trends and regulations related to trading platforms including digital stock tokens. The main law enforcement cases of the authorities and the major trends in legislation, including those proposed are reviewed.

Crypto asset classification system

“From a regulatory perspective, the UK FCA distinguished between regulated tokens and non-regulated tokens in the Perimeter guidance, which is a regulatory boundary guidance, and included electronic money tokens and securities tokens.” There are largely divided into utility tokens and exchange-traded tokens in the unregulated tokens outside,” he explained.

Definition and regulation of virtual assets

Lee said the definition of ‘Virtual Asset’ used by the International Anti-Money Laundering Organization (FATF) in its ‘Risk-based Approach Guidance for Virtual Assets. It is transferable and can be used for payment or investment purposes, excluding digital awards of fiat currency, securities and other financial assets.”

Meanwhile, in Korea’s Act on Reporting and Using Specified Financial Transaction Information, it is defined as ‘including electronic certificates that can be traded or transferred electronically as having economic value and all rights related thereto’. Prepaid electronic payment methods and electronic securities are excluded.

Existing customer protection regulations related to safety protection and trust storage of digital securities assets

Lee mentioned the SEC (Securities and Exchange Commission)’s main contents of the interim position statement released in December 2020, “they announced the position of encouraging innovation in the application of customer protection regulations related to digital securities assets, and they are collecting opinions from all walks of life. “If they keep (Terms and Conditions), they are in a position not to take enforcement action for the next five years due to violation of regulations.”

Trends of the UK Ministry of Finance (HMT), Central Bank (BoE), and Financial Conduct Authority (FCA) regarding stablecoins

Lee said, “The British Ministry of Finance, together with the Bank of England and G7, has coordinated the minimum policy expectations for the global stablecoin project, and the FCA provides regulatory boundary guidance for crypto assets, including stablecoins. “Perimeter guidance on crypto assets has been clarified. “In Europe, the 5th AML Directive of the European Union has been in effect since January 2020, and DLT-based cross-border remittances within the regulatory sandbox. (Cross-border remittance) is being piloted”.

Major issues and future tasks

Lee said, “Clarify the definition of terms that are the basis for the application of all legal systems, present guidance, collect public opinions and promote the enactment of related legislation, institutionalize financing and trading platforms through tokens, and institutionalize fund requirements for investing in crypto assets. And consumer protection, etc.,” he said. “The authorities announce the results through collaboration and research and frame the necessary systems and rules through clarification of regulatory boundary guidelines, public opinion collection, and publication of results, etc. It is necessary to prepare the work.”

※Please note that the content of the presentation is not related to the official position of the relevant authorities.

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Delio Digital Asset Finance Group, established in 2018, is №1 fintech company based in Seoul and acquired digital asset licenses from Korean and US governments.