South Korea’s Financial Services Commission (FSC) is preparing legislation to enhance regulatory oversight of virtual asset exchanges, focusing on the qualifications of major shareholders and governance structures. This announcement comes in response to concerns about the lack of transparency and potential risks associated with the current regulatory framework.
FSC Chairman Kim Byung-hwan addressed the National Assembly’s Political Affairs Committee during a comprehensive state audit, stating, “Under current laws, including the Specific Financial Information Act and the Act on the Protection of Virtual Asset Users, there is no legal basis for scrutinizing major shareholders. We have therefore submitted a revision to the Specific Financial Information Act as a legislative bill to empower the examination of major shareholders.”
This move follows criticism from People Power Party lawmaker Kwon Seong-dong, who highlighted the discrepancy between the stringent shareholder vetting processes for banks and the absence of such procedures for virtual asset exchanges. Kwon pointed to the case of Bithumb, a major South Korean cryptocurrency exchange, as an example of the potential risks. “Bithumb’s governance structure revolves around two key figures: former Chairman Lee Jung-hoon, currently on trial for alleged fraud amounting to 110 billion won, and Initial 1 Investment Association, whose de facto owner, Kang Jong-hyun, was arrested on charges of embezzlement and stock price manipulation,” Kwon stated.
He urged the FSC to take swift action to establish clear procedures for verifying the identity, ethical standing, and credibility of major shareholders in virtual asset exchanges.
