FSS orders crypto companies to shape up before new regulations take effect in July

The Financial Supervisory Service urged digital asset service providers to comply with the virtual asset investor protection law before it takes effect in July.

Financial Supervisory Service Gov. Lee Bok-hyun speaks during a meeting with CEOs of Korea's virtual asset service operators on Wednesday in Mapo District, western Seoul. [YONHAP]

The Financial Supervisory Service (FSS) called on the CEOs of digital asset service providers to ensure strict compliance with the virtual asset investor protection law, which is set to take effect in Korea by July.

FSS Gov. Lee Bok-hyun chaired a meeting in western Seoul on Wednesday with top executives from 20 digital asset service providers in Korea, with about five months left before the Act on the Protection of Virtual Asset Users — which was signed into law last July — takes effect.

The FSS released a road map to facilitate the implementation of the law's protective measures for local companies the same day.

CEOs from service providers in the digital currency, cryptocurrency and virtual wallet sectors were in attendance, including Dunamu CEO Lee Sirgoo.

The FSS governor demanded that the CEOs “ensure a perfect implementation of fundamental requirements involving the organizational structure, systems and internal control measures in line with the road map before the law comes into effect,” in his remarks, adding that any violations would be dealt with severely.

The road map demands that service providers establish or revise their internal rules to toughen up self-monitoring and compliance systems by February, set up internal bodies to implement regulative measures by March and set up a digital system to record and monitor transactions and detect and report abnormal activity by April.

The virtual asset user protection law mandates that service providers protect users’ deposits and virtual assets and designates banks to manage the deposits held by companies. Service providers are also obligated to secure a certain percentage of their virtual assets offline.

The policy also imposes a minimum prison sentence of one year or a fine ranging from three to five times the amount of illegitimate gains on those found to have made illegal trades. Trades producing illegal gains in excess of 5 billion won ($3.8 million) could result in a life sentence.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]