The top financial regulator in South Korea has now mandated crypto-related companies to be more detailed in their financial statements. The new rule, which will kick off in January 2024, aims to boost transparency in crypto disclosures.
The South Korean Financial Services Commission (FSC) announced the latest development on Tuesday, July 11, revealing that the Korea Accounting Standards Board has reviewed and approved the draft guidelines.
Crypto-Related Firms In South Korea Must Provide Adequate Information To Regulators
The FSC is responsible for drafting and amending financial laws and regulations. But it is also mandated to inspect, supervise and sanction financial institutions and issue operational licenses and approval. As such, the FSC has the legal power to supervise foreign exchange transactions, giving it the authority to issue new regulations for companies.
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The latest rules on financial transactions aim to ensure transparency in the South Korean crypto industry. This means that companies operating in the industry must provide full information about their crypto tokens in terms of number and characteristics. They will also provide the details of their business models and accounting policies related to sales of crypto assets and the profits made from them.
Regarding companies that hold crypto assets, the FSC’s new laws mandate them to disclose all information about the tokens in their possession.
Most importantly, these new rules will enable companies to recognize crypto asset sales as profit once they’ve allocated rewards and perks to the crypto holder.
FSC New Rules Aim To Achieve Three Important Things
One of the first reasons for the FSC’s new rules is to ensure transparency in crypto firms’ accounting. The regulator took up the challenge due to the increasing crimes committed with crypto assets worldwide.
According to the Chainalysis report, the total value of crypto assets sent to illicit addresses amounted to $20 billion in 2022. This amount shows an increase from the $5 billion total in 2017.
Secondly, the FSC wants to protect investors from the activities of these crypto firms as a crypto-related firm in South Korea sparked suspicion among investors when it changed its financial statement. As reported by a local news outlet, the blockchain-based game developer Wemade had published its financial statement but later reversed it to remove 40% annual revenue of 2021.
Another important reason for the rule is to boost the growth of South Korea’s crypto industry. Currently, the number of crypto investors in the country represents a notable portion of the global market.
According to a Xangle report in 2022, the South Korean crypto market has been increasing every year. The report showed that the market controls 8.7% of Bitcoin’s trading volume after the US at 69.8% and Japan at 11.3%.
The FSC’s new rules come after the country’s National Assembly passed the Virtual Assets User Protection Act. These new rules will ensure the industry’s growth as the investors will be protected adequately in transactions and interactions with crypto firms.
Featured image from Pixabay and chart from TradingView.com
