National Assembly Legislative Research Office: "Virtual Currency Market Requires Regulation Equivalent to Capital Markets Act"

Legislative Research Office Releases Report on "Measures to Curb Speculation and Protect Victims of Crime Related to Virtual Assets"
Paper Cited in Report: "Industry-Specific Laws Practically Difficult"

[Asia Economy Reporter Gong Byung-sun] The National Assembly Legislative Research Office pointed out that the cryptocurrency market should be regulated with reference to the Capital Markets Act. It also emphasized revising existing laws over enacting industry-specific laws.

On the 10th, the Legislative Research Office released a report titled "Measures to Suppress Speculation Related to Virtual Assets and Protect Crime Victims." The report highlighted the need to define cryptocurrencies and establish mechanisms to prevent unfair trading practices amid the recent cryptocurrency market boom.

The Legislative Research Office argued that the cryptocurrency market should be regulated by referring to the current Capital Markets Act. The Capital Markets Act regulates financial products such as stocks and derivatives. Specifically, it cited Articles 174, 176, 178, and 178-2 of the Capital Markets Act. These articles include prohibitions on insider trading, market manipulation, unfair trading practices, and disruption of market order.

There have been ongoing calls for regulations equivalent to the Capital Markets Act in the cryptocurrency market. Japan amended its Financial Instruments and Exchange Act in 2019 to treat cryptocurrencies as financial products while imposing strong regulations. However, experts expressed concerns that the "Virtual Asset Business Act" proposed by Rep. Lee Yong-woo of the Democratic Party on the 7th only includes provisions from the Door-to-Door Sales Act, the Act on Reporting and Using Specified Financial Transaction Information, and the Fair Trade Act, making the regulatory framework insufficient.

The report also suggests placing more emphasis on revising existing laws rather than enacting industry-specific laws. The Legislative Research Office proposed two legislative approaches for cryptocurrency regulation: a separate regulatory framework through a new single industry-specific law and amendments to existing laws. While cautioning that whichever approach is chosen, it should not conflict with current laws, the report highlighted problems with industry-specific laws. It pointed out that such laws would require considerable time to gather opinions from market participants and regulatory authorities.

The report cited a paper supporting the view that revising existing laws is more efficient than enacting industry-specific laws. In the paper "A Study on Japan's Crypto Asset Legal System and Its Implications" by Professor Lim Byung-hwa of Suwon University’s Department of Economics, it is noted that realistically, it is difficult to collect opinions from diverse market participants. The paper also argues that to avoid disadvantages caused by regulatory differences with other countries, a practical approach is to swiftly respond by gradually amending existing laws.

There were also calls for an executive-led control tower. Since 2017, ten ministries including the Financial Services Commission have responded to issues in a consultative body format, but the lack of a responsible entity has left the cryptocurrency market neglected. The report stated, "The legal status of cryptocurrencies is unclear, and due to siloed structures among ministries, the government's role and responsibility remain uncertain," and added, "Instead of a loose consultative body, a control tower should be established or a lead ministry designated to systematize coordination among ministries."

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