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South Korea to Ease Crypto Major Shareholder Disqualification Rules, Exempt Minor Violations
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South Korea’s Financial Services Commission plans to create exceptions to rules that disqualify major shareholders of virtual-asset service providers, allowing some to avoid disqualification even if they received criminal penalties for legal violations, provided the punishment stemmed from a joint-penalty provision or the offense was minor.
In a written response submitted to the National Assembly’s Political Affairs Committee, the FSC said it plans to add exception clauses to its fitness review standards for major shareholders of crypto businesses, Newsis reported on August 10. The move reflects recommendations from the Regulatory Rationalization Committee, a presidential advisory body.
The FSC said it will refer to precedents under the Capital Markets Act and the Online Investment-Linked Finance Business Act. It plans to revise the system so criminal penalties tied to a major shareholder’s legal violations would not count as grounds for reporting disqualification if they arose from joint-penalty provisions or involved minor breaches.
The move comes in response to industry concerns over revised enforcement rules under the Act on Reporting and Using Specified Financial Transaction Information, which take effect on August 20. The amended enforcement decree adds past violations of the Fair Trade Act, the Punishment of Tax Offenses Act and the Act on the Aggravated Punishment of Specific Economic Crimes to the list of disqualifying factors for major shareholders of crypto firms. The standards will apply not only to new filings but also to renewal reviews conducted every three years.
The FSC also said it will pursue changes to network-separation rules for the financial industry as the use of digital technologies such as blockchain and artificial intelligence expands. For financial companies with sufficient security capabilities and AI capacity, the regulator plans to seek relaxation or removal of the rules through a regulatory sandbox. It will also review regulatory changes for operations that require connections to external networks, including public blockchains.
On the use of won-based stablecoins, the FSC said it will continue consultations with relevant agencies while reviewing not only the Digital Asset Act but also related laws including the Foreign Exchange Transactions Act and the Act on Reporting and Using Specified Financial Transaction Information. It also plans to prepare measures to improve the interoperability and scalability of won stablecoins by referring to cases in major countries.
The FSC said it and the Financial Supervisory Service will monitor how Upbit’s fee-waiver policy for stablecoins affects market competition. Any institutional changes deemed necessary will be reflected in the legislative process for the Digital Asset Act.
