"Amendment to the Electronic Financial Transactions Act: External Liquidation of Big Tech and Legalization of Liquidation Institutions Are Desirable"

Financial Research Institute Discussion on Amendments to the Electronic Financial Transactions Act
"Supervisory Authority Must Be Granted to Clearing Institutions"

[Asia Economy Reporter Kiho Sung] The Financial Services Commission and the Bank of Korea are confronting each other through an online debate over the amendment to the Electronic Financial Transactions Act. The FSC is emphasizing the necessity of introducing electronic payment transaction clearing businesses and granting supervisory authority over clearing institutions. On the other hand, the Bank of Korea holds the position that the payment and settlement system is an inherent function of the central bank, and it is appropriate for the central bank to have monitoring and investigative authority over electronic payment transactions as well.

On the 18th, the Korea Institute of Finance held a discussion on the amendment to the Electronic Financial Transactions Act and expressed related positions. The Bank of Korea emphasized in a webinar held at the National Assembly the previous day that payment and settlement are core functions of the central bank based on the issuance authority. It strongly opposed the idea of external clearing of internal transactions of big tech companies, arguing that the Financial Services Commission would become a 'Big Brother' capable of scrutinizing users' shopping details. In contrast, the FSC believes that internal transactions of digital financial companies should also be monitored and supervised by using the Korea Financial Telecommunications and Clearings Institute’s payment and settlement system (external clearing).

Researcher Sunho Lee of the Korea Institute of Finance explained in his presentation titled "Significance and Key Issues of the Amendment to the Electronic Financial Transactions Act" that "even for the same financial service, different laws may be applied depending on the means," and added, "Ultimately, discussions on rational regulatory system reform, including transition to a functional regulatory framework and restructuring of licensing systems to apply a consistent supervisory system based on risk, are necessary."

He further emphasized, "Can activities regulated under other financial laws such as the Banking Act, the Act on Capital Markets and Financial Investment Business, and the Insurance Business Act be included as regulatory targets simply because they are conducted through electronic financial transactions?"

Concerns Over Personal Information Transfer: Trust Issues in Institutions More Than Clearing Itself

Regarding external clearing, he said, "Strengthening behavioral supervision over comprehensive payment service providers could be an alternative," but added, "However, a highly sophisticated continuous supervisory system must be designed to monitor the big tech clearing transactions, which reach 10 million cases daily."

Attorney Sunggu Jeong of Kim & Chang Law Firm emphasized the introduction of mandatory external clearing through his presentation on "User Asset Protection System under the Amendment to the Electronic Financial Transactions Act." He first explained, "Conditions requiring clearing include cases where there are too many transactions needing settlement among multiple parties, and cases where settlement is not completed simultaneously with the transaction," and pointed out, "In preparation for electronic financial companies becoming comprehensive payment service providers and directly participating in micro-payment networks in the future, electronic payment transactions by electronic financial companies also need to be subject to clearing."

He also stated, "Clearing is necessary even for internal payment transactions of electronic financial companies," explaining, "It functions as a premise for preventing misuse of user deposits through transparency of internal transactions and for returning user deposits in preparation for the insolvency of electronic financial companies."

Attorney Jeong said, "Legislation of clearing institutions is desirable not only for electronic payment transactions but for almost all clearing," and regarding excessive concerns about personal information transfer, he said, "It is more a matter of trust in clearing institutions than a problem with clearing itself."

In the subsequent comprehensive discussion, moderated by Dr. Jeongho Seo of the Korea Institute of Finance, panelists included Jungho Jeong, Director of Hana Financial Research Institute; Jisik Kim, Director of Naver Financial; Kyungjin Choi, Professor of Law at Gachon University; Junghwan Hyun, Professor of International Trade at Dongguk University; Seongwon Jang, Deputy Secretary General of the Korea Fintech Industry Association; and Hanjin Lee, Electronic Finance Division Director at the Financial Services Commission.

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