<p>There have been <a href="https://www.getnews.co.kr/news/articleView.html?idxno&#61;638959" rel="noopener noreferrer nofollow">recent calls</a> in South Korea for crypto investment management companies to be subject to the Financial Investment Services and Capital Markets Act amidst concerns about potential regulatory blind spots negatively impacting crypto investors.</p><h2 id="header-0">Pushing for regulatory oversight</h2><p>Kang Seong-hoo, chairman of the Korea Digital Asset Business Association (KDA) went into detail regarding the issue during a forum held by the association on Thursday to discuss the efficient use of technology and safety management in the era of the digital economy.</p><p>He emphasized that dealings related to virtual asset management such as deposits, lending, and staking must be regulated by authorities under the Financial Investment Services and Capital Markets Act. This is due to the fact that crypto investment management companies are not within the purview of the Act On Reporting and Using Specified Financial Transaction Information or the Virtual Asset User Protection Act, the latter of which is <a href="https://medium.com/&#64;coinness.gl/koreas-virtual-asset-user-protection-act-to-take-effect-in-july-next-year-d3df61766cd6" rel="noopener noreferrer nofollow">set to take effect next year</a>.</p><p>The Act On Reporting and Using Specified Financial Transaction Information defines financial companies as those that provide services for selling, buying, exchanging, transferring, keeping, or managing virtual assets; or act as a broker, intermediary, or agent for these services. However, there is no mention of crypto management companies.</p><h2 id="header-1">Echoes of past crypto platform controversies</h2><p>These concerns are driven by the looming possibility of another debacle like the <a href="https://koreajoongangdaily.joins.com/2023/06/18/business/finance/korea-haru-invest-delio/20230618174211256.html" rel="noopener noreferrer nofollow">class-action lawsuits against crypto platforms like Haru Invest or Delio</a> arising again as a result of regulatory gray areas. Two months ago, investors had filed a legal complaint after the two lenders unexpectedly suspended customer deposits and withdrawals, claiming that they suffered around KRW 50 billion (approximately $39 million at the time of the incident) in damages as a result.</p><p>Furthermore, the Financial Intelligence Unit (FIU), a division under the Korean Financial Services Commission (FSC), recently <a href="https://www.kofiu.go.kr/cmn/file/downloadBoard.do?seCd&#61;0007&amp;ordrNo&#61;194&amp;fileOrdrNo&#61;25" rel="noopener noreferrer nofollow">stated</a> in a report that virtual asset deposits, lending, and DeFi services do not fall under the obligations of the Act On Reporting and Using Specified Financial Transaction Information.</p><p>“Given the context of the ongoing crypto winter since last year, the business model of virtual asset management companies, which is heavily reliant on arbitrage between exchanges, poses a high risk of incidents similar to the Haru Invest and Delio cases,” said Chairman Kang.</p><p>“In order to ensure virtual asset user protection and market safety, authorities should promptly explore regulatory measures under the Financial Investment Services and Capital Markets Act for virtual asset management such as deposits, lending, staking, and the like.”</p>

Calls for Regulation of Crypto Investment Management Firms Amidst Growing Concerns

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