'Full Disclosure of Virtual Assets' Effectiveness Controversy... Coin Industry "Difficult to Track Personal Wallets" (Comprehensive)

Political Circle Pushes for 'Full Disclosure of Virtual Assets'
Coin Expert: "About 20,000 Coins Difficult to Trace"
Disclosure Based on Lawmakers' Conscience... "Discussion on Cumulative Changes"

Amid the rapid progress of legislation requiring lawmakers to disclose virtual assets, triggered by Rep. Kim Nam-guk's 'coin investment suspicion,' concerns are emerging that a full survey of coins may lack effectiveness. This is due to the structure where overseas exchanges or personal wallets cannot be tracked unless directly reported.

According to political circles and the industry on the 23rd, the National Assembly's Special Committee on Political Reform (Jeonggae Teukwi) held the first subcommittee on bill examination the day before and unanimously passed a revision to the National Assembly Act requiring virtual assets to be specified in the assets of elected lawmakers registered with the National Assembly Ethics Review Advisory Committee. On the same day, the Administrative Safety Committee discussed the 'Public Officials Ethics Act Amendment' to include virtual assets in the disclosure of lawmakers' assets. Earlier, the National Assembly's Political Affairs Committee adopted a resolution to disclose the virtual assets of its members.

If these bills pass the plenary session of the National Assembly on the 25th, they are expected to be implemented starting December this year.

Law on Disclosure of Lawmakers' Virtual Assets to be Processed at Plenary Session on the 25th

[Image source=Yonhap News]

For existing asset disclosure targets such as land, buildings, real estate, cash, deposits, stocks, jewelry, artworks, antiques, and intellectual property rights, lawmakers voluntarily report changes in assets to the National Assembly Secretariat, the registration agency, and the Public Officials Ethics Committee reviews them. Experts point out that since virtual assets are also subject to voluntary reporting, a full survey may lack effectiveness. Professor Hong Ki-hoon of Hongik University's Department of Business Administration said, "If it is in the form of voluntary reporting, only those without problems will submit their cryptocurrency transaction details," adding, "Ultimately, it will be close to a 'turning a blind eye' form."

There is a solution to enforce reporting. Lawmakers can submit consent forms for the use of personal information to the Anti-Corruption and Civil Rights Commission (ACRC), which investigates corruption and conflicts of interest among public officials. During the 2021 Korea Land and Housing Corporation (LH) speculation scandal, both ruling and opposition parties submitted consent forms for personal information when requesting a full investigation of real estate involving lawmakers and their families. Through this, the ACRC confirmed that 12 members and their families from the Democratic Party and 12 from the People Power Party were involved in the LH speculation scandal.

Once the consent form for personal information is submitted, virtual currency transaction details stored at domestic cryptocurrency exchanges such as Upbit, Bithumb, Coinone, Korbit, and Gopax can be obtained. Domestic exchanges record investors' transaction details on central servers. Currently, only the Justice Party has submitted a consent form for personal information to the ACRC regarding a full cryptocurrency survey. Professor Hong said, "A full cryptocurrency survey through domestic exchanges is quite meaningful," adding, "Such actions like a full survey are necessary to restore trust in lawmakers embroiled in lobbying allegations."

Tracking Difficult Without Voluntary Reporting of Overseas Exchanges and Personal Wallets

The number of virtual asset service providers reported to the Financial Intelligence Unit (FIU) is 36. Among them, five officially registered domestic virtual asset exchanges have real-name accounts issued and managed by banks. In South Korea, the 'Travel Rule' (a fund transfer tracking system) was applied from March 25 last year under the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Information Act), mandating virtual asset exchanges to record identity information of senders and receivers of virtual assets. However, tracking is difficult when the Travel Rule does not apply.

In particular, virtual currency transaction details through overseas exchanges cannot be identified unless the subjects voluntarily report them. Overseas exchanges, which advocate decentralization, do not store transaction details on their servers. Also, overseas exchanges require transactions through anonymous personal cryptocurrency wallets. While wallet addresses storing virtual assets can be tracked if disclosed, verification is difficult before disclosure. In Rep. Kim's case, since he used domestic exchanges and disclosed specific transaction details during the explanation process, it was a case where the wallet address was reverse-tracked. Professor Lee Byung-wook of Seoul School of Integrated Sciences and Technologies pointed out, "Not only overseas exchanges but also virtual currencies not listed on domestic exchanges cannot be identified," adding, "We have to rely on the conscience of lawmakers."

[Image source=Yonhap News]

Therefore, experts advise that a full survey should be conducted only after sufficient discussion on specific verification methods and standards. Professor Hwang Seok-jin of Dongguk University's Graduate School of International Information Security explained, "Currently, there are over 23,000 virtual assets," adding, "New virtual assets that we do not know at all may emerge, and we need to decide how far to disclose among them." He continued, "We need to discuss whether to disclose the number of virtual assets or convert virtual assets into Korean won and disclose the amount," adding, "I think specific coordination on timing and methods is necessary."

A National Assembly Administrative Safety Committee official said, "Even for currently registered assets such as cash and precious metals, if the person does not report, it is practically impossible to know," adding, "We plan to discuss in detail the concerns such as cumulative change history and reporting periods."

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