[Regulatory Innovation in Words Only] Will the Revised Financial Innovation Act to be Enforced Next Month Serve as a Catalyst?

Business Operators Can Also Request Regulatory Improvements from the Government
Extension of Special Cases When Deciding to Revise Financial Laws
"Reform Tasks Must Be Actively Interpreted and Accepted"

Key Amendments to the Financial Innovation Act. Photo by Financial Services Commission

[Asia Economy Reporter Kim Hyo-jin] Despite the slogan of removing "partition regulations," criticism continues that innovation momentum is minimal as explicit regulations are rather increasing. In this context, attention is focused on the amendment to the "Special Act on Financial Innovation Support (Financial Innovation Act)" to be implemented next month.

It is pointed out that active and meticulous management by financial authorities is urgently required to maximize the purpose of the amendment, which allows innovative financial businesses to request regulatory improvements from the government, and to act as a catalyst for overall regulatory innovation.

According to the government and financial circles on the 9th, the amendment to the Financial Innovation Act, which will be enforced on July 21, allows innovative financial businesses to request improvements to relevant regulations from the Financial Services Commission or related administrative agencies up to three months before the expiration of the special period. In addition, the amendment specifies the judgment procedures of the Financial Services Commission and other regulatory authorities regarding the maintenance of financial-related laws and regulations following the business operators' requests for regulatory improvements. If it is decided to revise the financial-related laws and regulations, the special period for innovative financial services is considered not expired until the revision is completed and implemented.

In such cases, the special period can be extended for up to 1 year and 6 months (6 months plus two extensions of 6 months each) from the expiration date of the innovative financial service designation period. The existing five regulatory sandbox laws (Financial Innovation Act, Industrial Convergence Promotion Act, Regional Special Zone Act, Smart City Act, Information and Communication Convergence Act) allow the special period for innovative services to be extended by 2 years in addition to the basic 2 years, so businesses could operate for a maximum of 4 years. According to the amendment, innovative financial businesses are expected to provide services more stably without anxiety about the expiration of the period.

If innovative financial services launched through the "regulatory sandbox" become completely free from regulations, consumer benefits are also expected to increase accordingly. A financial industry official said, "The issue is probably the will of the government or financial authorities," adding, "If businesses repeatedly enter and withdraw due to invisible barriers, both the slogan of innovative finance and the sandbox system will be meaningless."

"Active Interpretation and Acceptance Attitude Needed for Flexible Financial Innovation"

Concerns are already being raised within the financial sector. An example is the overseas stock "fractional trading" service introduced in 2019. Shinhan Financial Investment and Korea Investment & Securities currently provide overseas stock fractional trading services, but Shinhan Financial Investment’s service expires next month, and Korea Investment & Securities’ service expires in November.

Both companies plan to apply for re-approval, but there is a view that it will not be easy for the service to be formally introduced outside the sandbox. This is because it requires extensive adjustments beyond simply revising regulations, including the stock trading system.

A financial industry official said, "Fractional trading is highly popular among young people and new securities firms and can greatly contribute to expanding the scope of financial investment business," adding, "Although it is understood to be a challenging task, if related agencies make active efforts to find a solution, the attempt at innovative finance could gain more momentum."

The official also added, "Beyond whether the fractional trading service continues or not, there is increasing criticism that financial authorities need to show a more active attitude in interpreting and accepting various reform tasks," emphasizing, "This reflects the strong thirst for regulatory reform."

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