Crypto, consumer protection legislation to take center stage at National Assembly

Rep. Min Byoung-dug of the ruling Democratic Party of Korea speaks at a forum at the National Assembly in Yeouido, Seoul, July 22. Yonhap

The National Assembly is expected to focus on digital assets, financial crime prevention and fintech platforms as part of a push to strengthen capital market regulations, according to market watchers Tuesday.

Among key legislations are the establishment of security token offerings (STOs), legal frameworks and financial fraud responses powered by artificial intelligence (AI) technologies, and asset recovery in telecom-based financial fraud cases.

Also included are measures to foster fintech, which would allow budding tech entities to issue and broker fractional investment securities on regulated trading platforms.

The payment gateway (PG) industry will face tougher oversight following recent scandals such as the TMON and WeMakePrice settlement failure incidents, as well as the Lotte Card data leak.

According to market sources, 20 out of the 224 key bills pushed by the ruling Democratic Party of Korea (DPK) will be discussed by the National Policy Committee. Of them, eight involve the financial sector.

The ruling party said the drive comes amid a growing need to advance the capital market ecosystem in response to the rapid development of digital finance and calls for stronger investor protections.

Many of these bills are likely to pass during the Assembly session, backed by bipartisan support.

The most closely watched development is the legislation on STOs. The bill proposed by Rep. Min Byoung-dug is currently under review in the National Policy Committee’s subcommittee.

The move provides a legal foundation for tokenized real estate, intellectual property and other assets.

Another bill would allow fintechs with brokerage licenses to issue, distribute and manage fractional investment products.

This is in line with the Financial Services Commission's (FSC) plan to authorize up to two OTC trading platforms to manage those products, as part of efforts to create a regulated, healthy digital asset trading system.

Also prioritized are four bills governing telecom and financial fraud prevention, designed to implement the government’s comprehensive anti-voice phishing drive. They include leniency for whistleblowers or figures with minor limited involvement. Data on crimes will be shared across the industry and government authorities to help bolster AI platforms for fraud detection.

Another bill requires increased compensation from firms deemed responsible for data management failures.

Virtual asset exchanges will need to freeze accounts and refund account holders in cases of fraud-related monetary damages, the same stringent standard their traditional peers are held to.

Meanwhile, tougher PG industry oversight is set to follow after settlement failure scandals dating back to July of last year. Affiliated with Singapore-based e-commerce platform Qoo10, both TMON and WeMakePrice faced serious liquidity problems, leaving them unable to pay sellers or issue refunds for purchases.

As of late July 2024, payment delays to sellers were believed to reach 210 billion won ($151 million), but the figure soared to 818.8 billion won by August.

Prosecutors raided both platforms over allegations of fraud, embezzlement and misuse of funds, focusing on mergers and acquisitions of its overseas affiliates amid aggressive expansion moves.

In May, the Fair Trade Commission ordered the platforms to comply with the law governing consumer protection in e-commerce platforms, and required that refunds be processed within three business days.