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Industry experts urge legal embrace of digital assets

South Korea should create a legal framework to embrace up-and-rising digital assets, protect customers and support the growth of the industry, a group of experts said Friday.

Gathering for a seminar on the legalization of digital assets including cryptocurrencies, experts including lawyers, a lawmaker and businessmen voiced concerns over the government’s cautious approach that could hinder the development and soaring activities of digital assets.

During the seminar, Park Jong-baek, a lawyer at law firm BKL, said that legalization of crypto assets could create market standards and would be one step closer toward consumer protection. “By setting up legal grounds, innovation can be encouraged while risks are managed,” Park said. 

A man looks at digital boards displaying prices of digital currencies on March 30. (Yonhap)
A man looks at digital boards displaying prices of digital currencies on March 30. (Yonhap)

The current laws that govern cryptocurrency transactions, under the Specific Financial Transactions Act, focuses on anti-money laundering and price-fixing aspects. In addition, upon introducing the laws the government emphasized that it is not “institutionalization” of digital assets.

Industry experts said South Korea lacks a legal framework that could support the fledgling industry and provide guidelines to businesses.

Lawyers introduced overseas practices in the EU, New York, France, Hong Kong and Japan, which combined showed an overall increasing trend of legal acceptance of digital assets. In September 2020, the European Commission adopted legislative proposals for regulation on Markets in Crypto-assets, also known as MiCA. The New York State Department of Financial Services also introduced BitLicense, a business license of virtual currency activities.

“It appears the (South Korean) government is taking an approach that is based on the experience in 2017 and 2018, but that shouldn’t be the reason to hold back the rising sector as a growing list of countries are introducing legal grounds,” said Chief Operating Officer Cho Jin-suk of Korea Digital Asset.

In late 2017 and early 2018, the cryptocurrency market enjoyed its first heyday until alarmed regulators threw on a wet blanket with a series of regulations that aimed to tame speculative transactions. At the seminar, a government official reiterated the government‘s stance on focusing on monitoring illegal activities on crypto markets.

“But without a legal framework that supports the industry, it is difficult to distinguish legitimate businesses from scammers,” Cho of KODA added. “Once a legal framework is established, it could help create a sound business environment, thus helping consumer protection.”

Lee Jong-kyu, charged with self-regulatory efforts at the Korea Blockchain Association, also agreed with Cho on the necessity of legal grounds. “The government seems to encourage self-regulations by businesses, but at this moment, the efforts themselves are not enough as the market is growing dramatically,” Lee said.

By Park Ga-young (