DR & AJU Legislation & Government Relations Consulting Center's latest issue of its specialized legislative journal, the Policy & Business Report, is now available in digital format.
Virtual assets to be included in asset registration… Will the second-phase legislation on virtual assets speed up if the Amendment to the National Assembly Act is passed in the plenary session?
A bill requiring high-ranking public officials, including lawmakers, to report their virtual assets was passed in the plenary session of the National Assembly on the 25th.
At the plenary session, the National Assembly passed the Amendment to the Public Service Ethics Act, which subjects virtual assets to the asset reporting and disclosure of lawmakers and high-ranking public servants of Grade IV or higher. It also passed the Amendment to the National Assembly Act, which subjects virtual assets to the “registration of private-capacity interests” that lawmakers must report to the National Assembly.
The Amendment to the National Assembly Act was passed by 269 votes out of 269 lawmakers present, and the Amendment to the Public Service Ethics Act was passed by 268 votes out of 268 lawmakers present.
The Amendment to the National Assembly Act requires lawmakers to specify the status of virtual assets when registering their assets in the National Assembly and to include virtual assets to the private-capacity interests to register. Accordingly, from the 22nd National Assembly, members must specify cryptocurrency in property matters.
By the end of June, Members of the 21st National Assembly must also register the current status and changes in cryptocurrency holdings acquired between the beginning of their term and May 31 of this year.
The Amendment to the Public Service Ethics Act requires lawmakers and high-ranking government officials to register all cryptocurrency assets regardless of the amount.
This amendment also restricts the possession of virtual assets by public officials and their stakeholders who engage in tasks related to acquiring information on virtual assets or exerting influence on virtual assets.
While the existing Public Service Ethics Act stipulated cash, stocks, claims, gold, jewelry, antiques, memberships, etc., as assets subject to disclosure, it had excluded virtual assets.
In this regard, as a consequence of the mandatory registration of virtual assets, the virtual asset industry expects for virtual assets to be officially attain the status of an asset. This is because the Amendment not only requires the disclosure of public officials' virtual asset holdings, but will also impose taxation on virtual assets, starting in 2025.
Furthermore, the mandatory disclosure of virtual asset holdings will free virtual assets from negative perceptions such as "shady transactions" and "money laundering" that was accumulated over time. Along with this, some predict that virtual assets will be recognized for its value as an asset.
Meanwhile, as the National Assembly is quickly advancing the legislation on virtual assets, financial authorities have decided to quickly establish rules for unfair trade, including the issue of market price manipulation of virtual assets. To establish market order, the government plans to supplement the legislative gap through self-regulation, etc., for matters to be stipulated in the next bill, such as the issuance and disclosure of virtual assets.
At the 7th Digital Asset Special Committee on the Civil, Party, and Government Meeting on the 25th, Seok Ran LEE, the head of the Financial Innovation Division at the Financial Services Commission, said, “There has been quite some progress (in the legislation of the first-phase virtual asset user protection bill), and the government is planning to act in accordance with the law.” In addition, she stressed, “First, we will prepare the necessary enforcement decrees and agreement regulations related to the first-phase bill.”
The first phase of the Virtual Asset User Protection Act, which focuses on the investor protection and punishment of unfair trade, is set to pass the plenary session of the National Assembly. The second phase of the bill handles measures to enhance transparency of the market including the issuance and disclosure of virtual assets.
The Virtual Asset User Protection Act was designed to protect the rights and interests of users who trade and use virtual assets. The purpose of this law is to maintain the soundness of the virtual asset market and ensure a safe environment for users. The Financial Services Commission supervises and determines matters on the enactment and regulations in this Act.
Ms. Lee stated, "We will also prepare reports on additional opinions proposed in relation to the second phase of the bill." She further explained, "We received various opinions on various issues, such as virtual asset issuance and distribution processes, conflicts of interest, stablecoins, and regulations on profit of virtual asset business operators, and plan to review them through research projects before the law goes into effect."
Regarding the legislative gaps that may arise before the second phase of legislation, such as damage from virtual assets with unclear business feasibility, she stated, "We will continue to supplement it in the form of self-regulation with the Financial Supervisory Service, industry, etc."
As the first-ever Korean law firm to issue specialized legislative journals, DR & AJU LLC has been publishing the monthly Policy & Business Report since August 2019. The May 2023 issue of the P&B Report conducted a full inspection of legislation proposed to the National Assembly Subcommittee, Standing Committee, and Plenary Session from April 15, 2023, to May 14, 2023, and selected and analyzed legislation with a significant impact on corporate activities. In the case of major legislation, key mentions of legislators, members of the Standing Committee, and government officials are included.
*DR & AJU Legislation & Government Relations Consulting Center provides P&B Report subscription service. Please contact us at Ic@draju.com for further inquiries.
