Professor Who Drafted the Electronic Financial Transactions Act Says "Digital Payment Regulations Should Be Placed in the Bank of Korea Act"

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[Asia Economy Reporter Eunbyeol Kim] There is an academic argument that regulations related to the payment and settlement systems of digital financial transactions should be placed under the Bank of Korea Act rather than the Electronic Financial Transactions Act, as this is preferable from the perspective of financial stability.

Professor Kyungyoung Jung of Sungkyunkwan University School of Law published a paper titled "A Critical Review of the System of the Electronic Financial Transactions Act and Recent Amendment Discussions" in the 39th volume, 3rd issue of the Korean Commercial Law Association's academic journal, Commercial Law Review, on the 16th, containing this viewpoint.

Professor Jung is the leading legal expert on electronic financial transactions in Korea and participated in drafting the Electronic Financial Transactions Act in 2006. Amid conflicts between the Bank of Korea and the Financial Services Commission over the authority to manage and supervise payment and settlement of financial transactions conducted through fintech and big tech companies, the academic expert who laid the foundation of the Electronic Financial Transactions Act sided with the Bank of Korea.

In his paper, Professor Jung stated, "While it is appropriate to regulate the digital payment transaction clearing system, it is inappropriate to stipulate this in the Electronic Financial Transactions Act," adding, "To institutionalize payment and settlement clearing, it is reasonable and internationally consistent to establish a legal basis in the Bank of Korea Act and to secure transparency and stability of the payment and settlement system through the formalization and specification of supervisory authority over existing operating institutions, considering the central bank's capabilities and characteristics."

Professor Jung also criticized the Financial Services Commission's current attempt to impose 'supervision' over payment and settlement system operators through amendments to the Electronic Financial Transactions Act as excessive regulation. He explained in the paper, "Management (regulation) of payment and settlement systems prioritizes stability and efficiency over transparency and soundness," and "While 'supervision' is required for profit-oriented financial institutions to ensure asset soundness and regulate unfair business practices, 'monitoring' is necessary for payment systems and their operators to enable early detection of systemic risks, prevent risk propagation, and facilitate efficient fund transfers."

Professor Jung argues that the Bank of Korea should be the subject of such monitoring. He stated, "In most countries, the central bank, which operates large-value payment systems, holds monitoring authority over small-value payment systems and their operators," adding, "Discussions on amending the Electronic Financial Transactions Act risk undermining the basic framework of the Act to expand supervisory authority, which could harm the efficiency of the payment and settlement system and financial stability."

Currently, the Financial Services Commission is pushing for the establishment of an 'electronic payment transaction clearing business' through amendments to the Electronic Financial Transactions Act, granting the Commission licensing and supervisory authority over electronic payment transaction clearing institutions responsible for this task. Furthermore, the proposed amendments require all transactions by fintech and big tech companies to be mandatorily processed through the systems of electronic payment transaction clearing institutions.

Regarding the background of these moves, Professor Jung said, "It seems the Financial Services Commission has long sought supervisory authority over the Korea Financial Telecommunications and Clearings Institute (currently under the Bank of Korea's jurisdiction), and appears to be pushing this through while creating digital-related financial regulations."

This content was produced with the assistance of AI translation services.