Korea has no laws and regulations which are specifically apply to cryptocurrencies. The Financial Supervisory Commission (FSC) and other Korean regulatory bodies have issued a number of press releases on basic government policies regarding, among other things, initial coin offerings (ICOs), cryptocurrency exchanges, and Ponzi schemes and other fraudulent activities involving bitcoin and other cryptocurrencies.
In its press releases issued back on September 1 and September 29 2017, the FSC stated that it would ban all ICOs. That said, many lawyers believe that unless a token or coin issued in a given ICO is classified as a security, the Korean authorities lack the legal grounds to prohibit its issuance. Therefore, a blanket ban on ICOs seems unrealistic.
Just like other jurisdictions, including the US, if a certain token or coin is classified as a security, then Korea’s security law, the Financial Investment Services and Capital Markets Act (FISCMA), may apply, and the ICO should go through a typical initial public offering process, including the filing of a registration statement with the FSC and the preparation of a prospectus. Similar to other jurisdictions, if a certain coin entitles its purchaser or holder to a dividend payment, profit sharing or voting right, then that coin is highly likely to be classified as a security. Criteria for distinguishing a security token from a utility token or payment token have not yet been clearly established, and there are no official guidelines from the Korean regulators to classify the tokens.
Korea has numerous cryptocurrency exchanges led by big powerhouses, like Bithumb, Upbit, Coinone and Korbit, and Korea’s total cryptocurrency trading volume is among the world’s top three markets. At this point in time, there are no specific laws and regulations that provide for cryptocurrency exchanges, even though a number of Korean lawmakers have attempted and are still attempting to amend existing laws or to draft a new special law to regulate cryptocurrency exchanges. At the moment, no particular licence or permit is required to establish and operate a cryptocurrency exchange. In the past, most of the exchanges applied for and obtained a mail order business licence as a matter of practice. However, recently, the Korea Fair Trade Commission stated that a cryptocurrency exchange is not an operator of a mail order business, and major exchanges cancelled or plan to cancel the mail order business licence they had already obtained.
(Chan Sik Ahn is a partner in the corporate practice group of HMP Law and heads the tech & comms team. He and his team provide clients with proactive, strategic and specialised legal advice on existing or potential legal issues relating to various breakthrough technologies that represent the fourth industrial revolution, such as IoT, big data, AI, 3D printing, VR/AR/MR, fintech, blockchain, bitcoin and other cryptocurrencies, cryptocurrency exchanges, drones, electric cars, driverless cars, secondary battery/renewable energy/new materials, games, and the sharing economy.)
