Following recent crackdowns by the US Securities and Exchange Commission (SEC), South Korean financial officials are reportedly planning to review crypto staking services on local exchanges.
South Korean officials told local news channel News1 that crypto staking services had been inspected internationally and that local services would be investigated. However, they did not provide a deadline for their inquiry.
South Korea follows the United States on crypto staking regulation
The crypto community’s concerns over the potential ramifications of the recent settlement between the United States Securities and Exchange Commission and Kraken are beginning to materialize.
No information was provided regarding the examination’s schedule and procedures. Nonetheless, it could influence legislative decisions. In contrast to other typical actions using digital assets, South Korean law does not currently define crypto staking.
In February, the Financial Services Commission of South Korea issued guidelines specifying the categories of digital assets that will be considered and regulated as securities in South Korea. In t The law, South Korea classifies securities as financial investments in which investors are not compelled to make extra payments following the first transaction.
A February 9 settlement between the SEC and Kraken crypto exchange marked the beginning of the global conversation on crypto staking. Kraken agreed to pay a $30 million fine and discontinue its staking business. The American crypto community and the interim SEC commissioner heavily criticized the move.
On Monday, the New York Department of Financial Services ordered Binance USD (BUSD) creator Paxos Trust Company to cease issuing its stablecoin. In addition, Paxos has received a separate notification from the SEC alleging that the BUSD stablecoin is an unregistered securities.
South Korea’s guidelines for regulating security tokens
South Korea’s Financial Services Commission (FSC) announced guidelines in the first week of February 2023 on which blockchain-based iterations of traditional securities, known as security tokens, will be regulated under the country’s capital markets legislation.
The guidance comes ahead of much-anticipated laws that will make security tokens more widely accepted. In addition, South Korean lawmakers are examining 17 alternative crypto-related legislative frameworks as part of their efforts to govern the crypto and blockchain sectors comprehensively.
The discussions are aimed at developing the Digital Asset Basic Act (DABA), a comprehensive legal framework for governing South Korea’s burgeoning cryptocurrency industry.
According to the guidance, security tokens relate to the digitalization of securities under the Capital Markets Act using distributed ledger technology and will apply exclusively to digital assets that qualify. In addition, the guidance clarifies that stablecoins, which are cryptocurrencies fixed to the value of other currencies such as the US dollar and used for payments or as a medium of exchange, will most likely not be considered securities.
On the other hand, digital assets corresponding to securities must be issued and distributed in compliance with all securities regulations under the Capital Markets Act. During the first half of 2023, we will promote institutionalization by submitting amendments to the Electronic Securities Act and Capital Markets Act to the National Assembly.
South Korean FSC
Digital assets with no issuer and no duty to “fulfill the obligations commensurate with the investor’s rights” will also most likely fall beyond the scope of security tokens. According to the guidelines, the proposed rules are intended to promote innovation while protecting consumers.
Binance CEO points to non-USD stablecoins
According to Binance CEO Changpeng Zhao, commonly known as “CZ,” the crypto industry will “probably” start employing euro, yen, or Singapore dollar-based stablecoins in the future, lessening its reliance on US dollar-based stablecoins.
CZ made the statement during a Twitter Spaces event on February 14 in response to a question regarding the crypto industry using gold as a measure of worth rather than the US currency. The usage of gold “makes sense,” according to CZ. However, “most people’s costs are still in fiat currencies.” As a result, the majority of investors compute their investment returns in dollars, which is why US dollar-backed stablecoins are “still relevant.”
However, CZ argued that the US government’s recent efforts against US dollar stablecoins would most likely force the global crypto sector to rely on other currencies to back stablecoins, such as the euro, yen, and Singapore dollar, as he explained:
I think given the current pressure and current stances taken by the regulators on the U.S. dollar-based stablecoins, I think that as you said, the industry will probably move away to non-U.S.-dollar- based stablecoins […] as a result of this, we probably will see more euro based or other Japanese yen, Singapore dollar based stablecoins, so it’s actually prompted us to look for more options in different places.
Changpeng Zhao
According to CZ, algorithmic stablecoins may play a larger role in the crypto ecosystem in the future. He did warn, though, that algorithmic stablecoins are inherently going to have risks that fiat-backed stablecoins do not. CZ’s comments come just one day after the SEC accused Binance USD (BUSD), a US dollar-based stablecoin, of being an unregistered “security” under US law.
