South Korea’s financial watchdogs to consider relaxing crypto regulations

New FSS governor says digital currencies have ‘some positive aspects’

South Korea’s financial watchdogs to consider relaxing crypto regulations

The new governor of South Korea’s Financial Supervisory Service (FSS) has indicated that the country’s financial regulator will consider relaxing cryptocurrency regulations.

According to a report by local media outlet The Korean Times, the incoming FSS governor Yoon Suk-heun, told reporters at his inauguration that “[r]egarding cryptocurrencies, there are some positive aspects”. Yoon was nominated for the post by the Financial Services Commission (FSC), the parent agency of the FSS.

“The FSS will collaborate with the FSC when an inspection on policies and financial institutions has different configurations associated with different scopes. FSC inspects policies, while the FSS examines and supervises financial institutions but with the oversight of the FSC," the new FSS head said, as quoted by The Korea Times.

Responding to question about regulation of cryptocurrency exchange, Yoon said that there were a lot of issues that needed to be addressed, although he declined to elaborate further. He added that better regulation would result in a more stable financial system.

The FSC earlier this year introduced measures aimed at curbing trading speculation and cryptocurrency-related money laundering. In late January, the watchdog ordered local banks and cryptocurrency exchanges to halt anonymous cryptocurrency trading and switch to real-name accounts. The new system also prevented foreigners and minor under the age of 18 to open account at the exchanges.

The new rules, combined with the reluctance of South Korean banks to work with smaller exchanges, led to a significant decline in crypto trading volumes in the country. South Korea’s four major crypto exchanges, Upbit, Bithumb, Coinone and Korbit, successfully switched to a real-name account system, but some smaller trading platforms were forced to shut down due to inability to comply with the rules.

"Markets expected the introduction of the real-name registration system would have been helpful to revive trading, but these efforts failed as local banks were reluctant to invite more crypto traders," The Korea Times quoted an unnamed Bithumb executive as saying. The newspaper also quoted Lee Jeong-ah, vice president at Bithumb, who said that the daily trading volume “plummeted to around 400 billion won from 4 trillion won before the financial regulators implement the new regulation”.

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