A key promise made by South Korean President Lee Jae-myung during his campaign, involving a significant overhaul of the country’s financial regulatory bodies, is no longer being pursued. This reversal casts a shadow of doubt over the future direction of cryptocurrency regulations in South Korea, as the reform was anticipated to address this sector specifically.
The South Korean government, along with the dominant political party and the presidential administration, have collectively decided to re-evaluate the proposed changes to the nation’s financial authorities starting from square one.
Consequently, the existing operational framework of the
Financial Services Commission (FSC)
and the Financial Supervisory Service (FSS) is predicted to remain unchanged. This update was
announced
by Han Jung-ae, a leading policy figure from the ruling Democratic Party, while speaking to reporters at the National Assembly this past Thursday.
The initial drive for reform originated from concerns about the excessive size and influence wielded by both the Ministry of Economy and Finance and associated financial regulators. Within South Korean political circles, officials holding positions within the Ministry of Economy and Finance are known to hold considerable sway.
This has led to them being nicknamed the “Mofia,” a blend of the Ministry’s name and the term “mafia,” reflecting their perceived power.
President Lee Jae-myung’s promise to reform this perceived “Mofia” was a popular element of his campaign, attracting significant public backing. The reform plans included various methods to reduce the scale of both the Ministry of Economy and Finance and the financial regulatory bodies it oversees.
The government and the ruling party had previously agreed on plans to dismantle the FSC, dividing its responsibilities related to policy and supervision. The financial policy duties of the FSC were to be reassigned to the Ministry of Economy and Finance, while financial supervision would be entrusted to a newly created agency focused specifically on protecting consumers.
Furthermore, there were discussions about establishing a separate Budget and Planning Office within the Ministry of Economy and Finance, reporting directly to the Prime Minister’s office. However, all of these proposals have now been abandoned.
This sudden policy shift has created a sense of confusion within South Korea’s cryptocurrency industry. The sector has been carefully monitoring which governmental organization would ultimately be responsible for
regulating crypto
following any potential restructuring.
There are now concerns that discussions concerning the legalization of a Korean
Won-backed stablecoin
may be delayed or disregarded altogether. Several domestic financial institutions, encompassing banks, credit card companies, and fintech businesses, are already in the process of developing their own stablecoin offerings.
More than ten banks, including the five largest commercial banks in South Korea, have established a collaborative council dedicated to the joint development of a stablecoin. They are exploring the option of releasing it through a shared joint venture.