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South Korea Takes a Stand: New Crypto Laws Coming to Tackle Asset Issuance and Stablecoin Regulation

South Korea is stepping up its regulation of the cryptocurrency market as financial authorities prepare for the second phase of virtual asset legislation. According to local media reports, the country’s Financial Services Commission (FSC) will focus on regulating the issuance of virtual assets, addressing conflicts of interest that may arise during issuance, and establishing a framework for regulating stablecoins.

The move comes after the passage of the Virtual Asset User Protection Act, which requires the FSC to submit a report on the issuance of cryptocurrencies and the conflicts of interest that virtual asset operators may generate during the process of issuing and distributing these assets.

To address these concerns, the FSC is set to embark on a research process that will focus on resolving conflicts of interest, regulating stablecoins, and establishing standards for virtual asset evaluation, advisory services, and issuance.

In addition to these measures, the FSC is also considering expanding the Virtual Asset User Protection Act through decrees in response to recent issues involving local investment platforms. For example, Haru Investments suspended user withdrawals on June 13 due to false information provided by an unnamed consignment operator. Similarly, Delio, another investment platform, halted withdrawals on June 14 due to its exposure to Haru.

Following these incidents, South Korean prosecutors have banned the executives of these firms from traveling abroad. In a meeting on July 3, the FSC reportedly discussed the possibility of expanding the Virtual Asset User Protection Act to cover virtual asset management firms, which currently operate in a regulatory gray area. The aim is to provide better protection for investors and prevent similar issues in the future.

The FSC has held discussions with other financial agencies and ministries about this proposed move, highlighting the government’s commitment to strengthening regulations in the cryptocurrency sector.

This move by South Korea to tighten regulation is part of a wider trend seen around the world as governments and financial authorities seek to create a more secure and transparent environment for cryptocurrency trading and investment. The volatility and lack of oversight in the crypto market have raised concerns about investor protection, money laundering, and the potential for market manipulation.

By establishing clear regulations and guidelines, authorities hope to provide greater confidence to investors and encourage the responsible growth of the cryptocurrency industry. This includes addressing issues such as the issuance of virtual assets, conflicts of interest, and the regulation of stablecoins, which have gained increasing popularity in recent years.

The focus on stablecoins is particularly important as these cryptocurrencies are designed to maintain a stable value by being pegged to a reserve asset, such as a fiat currency or a commodity. However, their regulation has been a contentious issue, with concerns about their potential impact on financial stability and the need for effective oversight. Establishing a regulatory framework for stablecoins will help address these concerns and ensure their responsible use within the market.

Overall, South Korea’s move towards further crypto legislation demonstrates the government’s commitment to creating a secure and transparent cryptocurrency market. By addressing issues related to asset issuance, conflicts of interest, and stablecoin regulation, the country aims to protect investors and promote the growth of the industry in a responsible manner. As the cryptocurrency market continues to evolve, it is expected that other countries will follow suit and introduce similar regulatory measures to ensure the long-term viability of the digital asset space.

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