A key campaign promise by South Korean President Lee Jae-myung – a significant overhaul of the nation’s financial regulators – is no longer being pursued. This decision throws the future of cryptocurrency regulations into doubt, as the reform was anticipated to play a crucial role in shaping the digital asset landscape.
The current administration, the dominant political party, and the presidential office have collectively decided to re-evaluate the proposed restructuring of financial oversight bodies from the ground up.
Financial Authority Restructuring Placed on Hold
Consequently, the existing framework of the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) is expected to remain in place. Han Jung-ae, a leading policymaker within the ruling Democratic Party, shared this update with journalists at the National Assembly on Thursday.
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The initial reform proposal stemmed from criticisms concerning the extensive reach and power concentrated within the Ministry of Economy and Finance and associated financial institutions. The term “Mofia” is often used in South Korean political circles to describe influential officials within the Ministry of Economy and Finance.
This term, “Mofia,” is a combination of “Ministry” and “Mafia,” highlighting the perceived influence of the Ministry.
President Lee Jae-myung’s pledge to reform this “Mofia” system received significant public approval. The proposed changes involved strategies to reduce the size and influence of both the Ministry of Economy and Finance and the financial regulatory bodies.
The government and the ruling party had previously agreed to disband the FSC and separate its policy-making and supervisory roles. The FSC’s financial policy functions were slated to move to the Ministry of Economy and Finance. A newly established agency focused on consumer protection was intended to handle financial supervision.
There was also discussion about creating a dedicated Budget and Planning Office under the direct supervision of the Prime Minister’s office within the Ministry of Economy and Finance. However, these plans are no longer being considered.
Significant Shift in Crypto Regulation Strategy
This sudden change in direction has sparked confusion within South Korea’s cryptocurrency sector. The industry was keenly anticipating clarity on which agency would assume responsibility for crypto regulation following the reorganization.
Concerns are now growing that the debate surrounding the legalization of a Korean Won-backed stablecoin could be delayed or even abandoned. Numerous domestic banks, credit card providers, and fintech companies have already started preparing to launch their own stablecoins.
More than ten banks, including the country’s five largest commercial lenders, have created a consortium to collaborate on a joint stablecoin project. They are exploring the possibility of issuing it through a jointly owned enterprise.