The Financial Services Commission (FSC) Hinted at the Possibility of Allowing Banks To Enter the Virtual Asset Business (Updated August 2022)

[Executive Summary]

◼ The Financial Services Commission (“FSC”) launched the Council on Innovating Financial Regulations (“Council”) and held its first meeting on July 19th. The Council announced its “Execution Plan for Innovating Financial Regulations” and that it will deal with tasks such as allowing financial institutions to enter the virtual assets market. Also, in regard to virtual assets, the Council plans to organize and overhaul regulations and policies through actions such as legislating the Framework Act on Digital Assets.

On July 19th, the Financial Services Commission (“FSC”) launched the Council on Innovating Financial Regulations (“Council”) and discussed its “Execution Plan for Innovating Financial Regulations” which touches upon the separation of financial and industrial capital, digital finance innovation , and virtual asset-related business operation. The Council has been established to facilitate the cooperation between the government and the market to innovate financial regulations. It also aims to vitalize IT / Platform businesses and investment in new technology in the finance industry at a time of blurring boundaries between finance and IT. The Council consists of 17 nongovernment experts in economy, finance, digital, law, and media. The chairman of the FSC, the director of the Financial Supervisory Service, and heads of other financial associations and research institutes attended the first meeting.

As it announced the “Execution Plan for Innovating Financial Regulations,” the Council stated that it will prioritize nine main tasks and 36 subtasks in four areas such as 1. expediting the digital transformation of the finance industry, 2. establishment of infrastructure to utilize new technology, 3. capital market advancement, 4. improvement of supervisory administration. Topics such as regulation relaxation on the incidental business of financial institutions and review of allowing financial institutions to enter the virtual asset market are included in the 36 subtasks.

This includes the Korea Federation of Banks ‘(“KFB”) suggestions, reflecting banks’ hope to expand their incidental business to virtual assets. The banks have not officially entered the virtual asset market for the parts that define “banking services” and “incidental services” under the current Banking Act do not include virtual asset-related businesses.

The KFB also requested to be allowed to invest in any industries, including virtual assets, without restrictions within one percent of equity capital to expedite the digital transformation of the finance industry. Under the current Banking Act, banks can only invest within 15 percent of equity investment for non-financial companies.

As the FSC announced the direction to innovate the financial regulations, banks’ entrance to the virtual asset business seems more likely. The virtual asset industry predicts that the announced innovation on regulations will contribute to the growth of the industry. When there still exist a good number of consumers with a negative perspective of virtual assets, socially trusted banks’ entrance into the business may help change people’s negative perspective to a positive one.

Along with some of the 36 subtasks such as “legislating the Framework Act on Digital Assets” or “establishing a regulation system for digital stocks,” the Council also plans to organize and overhaul regulations and policies on virtual assets through the legislation of the Framework Act on Digital Assets and other measures.

The size and credibility of the virtual asset market can be expected to grow from the banks’ entrance into the market if realized. The reduced legal and compliance risks in the market could stimulate and encourage more institutions and corporations to invest in virtual assets. However, it is advised for the market participants to keep an eye on the issue, as the market may experience some degree of turbulence from the higher competition if conventional financial institutions enter the market.

.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker