South Korea proposes vetting process for crypto executives to strengthen oversight

The Financial Services Commission (FSC) has announced proposed amendments requiring crypto company executives to secure regulatory approval before their appointments. This development marks a pivotal shift in the oversight of the crypto sector, with the FSC seeking to address and rectify the vulnerabilities present in the existing legislation.

Enhanced regulatory measures for executive appointments

The FSC disclosed its intention to refine the local crypto industry’s legal structure. Under the proposed amendments, any change in the executive lineup of South Korean cryptocurrency firms will necessitate prior approval from the FSC. This stipulation is absent in the nation’s existing financial transaction information laws. This initiative is designed to ensure that individuals assuming pivotal roles within crypto companies meet specific regulatory standards, thereby enhancing the integrity and stability of the crypto market.

The amendments are slated for review by the Ministry of Government Legislation before undergoing a voting process spearheaded by the FSC. If the proposals receive the necessary endorsements, they are anticipated to be enacted by the end of March, as Money Today reports. This regulatory overhaul underscores the FSC’s commitment to fortifying the governance of the crypto sector, aiming to mitigate risks and promote a safer investment environment.

Strengthening oversight and public participation

Further extending its regulatory ambit, the FSC’s amendments also propose granting the authority to temporarily halt the review of a crypto company’s license registration in instances where the company or its affiliates are subject to investigation by local or international regulatory bodies. This measure is intended to prevent entities with questionable compliance records from operating within the industry, thereby safeguarding investor interests and maintaining market integrity.

The FSC’s proposals include provisions that would empower the regulatory body to revoke a company’s registration if it is found to be in violation of the Act on Corporate Governance of Financial Companies by improperly appointing an executive.

Specifically, individuals convicted of a crime and who have not completed five years since serving their sentence would be ineligible for executive roles within crypto firms. This clause aims to ensure that leadership positions are held by individuals with unblemished legal records, reflecting the FSC’s stringent approach to corporate governance within the financial sector.

The announcement comes in the wake of Binance’s revelation that it is considering reducing its stake in the South Korean exchange Gopax, amidst concerns raised by the FSC. The delay in approving Gopax’s structural changes following Binance’s acquisition highlights the FSC’s cautious stance towards entities with unresolved legal issues, especially those facing regulatory scrutiny in jurisdictions outside South Korea.

In an effort to foster transparency and encourage public engagement, the FSC has opened the floor for feedback on the proposed amendments until March 4. This participatory approach signifies the FSC’s dedication to refining the regulatory framework in collaboration with stakeholders, aiming to strike a balance between innovation in the crypto space and the imperative of investor protection.