[Executive Summary]

• The Public-Private Joint TF for Digital Assets has been launched, and its first meeting was held with private experts and related ministries and organizations attending.
• Through the TF, 1) the legal nature of digital assets, the relationship of rights, and countermeasures against relevant crimes, 2) examination of potential risk factors of digital assets and preparation for countermeasures, 3) regulatory framework of digital asset issuance and distribution market, and 4) promotion of the blockchain industry are planned to be discussed.

1. Outline

• On August 17, 2022, the Public-Private Joint TF for Digital Assets has been launched, and its first meeting was hosted by So-young Kim, the vice chairman of the Financial Services Commission (FSC).
• This task force was formed to receive a wide range of opinions on various issues related to digital assets and to seek a balanced response plan. It is a government-wide cooperative system composed of private experts and related ministries and organizations.
• The TF meeting is planned to be held once a month, 1) to find a way to balance between financial consumer protection, financial stability, and fostering new technologies and industries, and 2) to continuously monitor international discussions and secure consistency with global regulation.
• At the first meeting, the global regulatory trends and the direction of domestic regulation on digital assets were discussed. The direction of the TF, including the tasks for discussion, was shared.
• The main participants of the first meeting are as follows:
  • [Non-governmental Members]: Experts from fields of academia, research, and legal;
  • [FSC]: Vice chairman, secretary general, director of Financial Industry Bureau, director of Capital Markets Bureau, director of Financial Innovation Bureau, director of Planning & Administration Office of the Korea Financial Intelligence Unit (KoFIU);
  • [Related ministries and organizations]: Director of Economic Policy Bureau of the Ministry of Economy and Finance, head of Commercial Legal Affairs Division of the Ministry of Justice, head of Digital Society Planning Division of the Ministry of Science and ICT, director of Payment & Settlement Department of the Bank of Korea, assistant deputy director of the Financial Supervisory Service (FSS)

2. Progress of the Government’s Response to Digital Assets

• FSC’s Vice Chairman So-young Kim reported the progress of the government’s response to digital assets as follows:
  • Completion of research analyzing and comparing various digital asset-related bills, which were pending in the National Assembly until early June, with overseas legislative trends to seek response directions to related issues.
  • At the end of June, related ministries and organizations jointly visited the U.S. Department of the Treasury, the Department of Justice, Federal Reserve Bank, IMF, and others to understand global regulation trends in greater detail.
  • From July, working-level discussions were held regarding the direction of future discussions through meetings with relevant ministries, private/nongovernmental experts, and industry officials.

3. The Progress Direction of the Public-Private Joint TF for Digital Assets

• As the TF announced its progress direction, it set out specific tasks in need of discussion:

1. The legal nature of digital assets, the relationship of rights, and countermeasures against relevant crimes

• It remarked that since digital assets emerged in accordance with new technologies, there may be limitations to encompass this new type of assets within the current legal system. It emphasized that it is, therefore, necessary to examine the consistency of relevant bills and regulations with the current legal framework and to complement the insufficient aspects.
• As a related discussion abroad, it provided a report released by the U.K. Law Commission as an example, in which data objects are suggested to be classified separately from those of tangible property rights and intangible property rights.
• It also stated that, in order to effectively respond to the misuse of digital assets for cross-border criminal activities, it is necessary to enhance the technical capacity of law enforcement authorities for monitoring/tracking and strengthen the international cooperation system.
• The legal nature and relationship of rights of digital assets, the bankruptcy system and digital assets, strict regulation and crackdown to prevent digital asset-related crimes (money laundering, fraud, extortion, etc.), and consumer protection measures need to be discussed by the TF.

2. Examination of potential risk factors of digital assets and preparation for countermeasures

• It was mentioned that as the link between the traditional financial market and the digital asset market expands, new risk factors such as risks and management of digital assets of financial companies, financial supervision issues related to digital assets, and risk factors related to new payment services are emerging.
• As the usage of digital assets as a payment method increases, there are concerns about the possible increase in transaction costs due to the market framework and as it may substitute fiat currency. Hence, for sustainable growth, risk factors must be thoroughly examined, and countermeasures suitable for the digital environment, such as the introduction strategy of the central bank digital currency (CDBC), must be preemptively reviewed.

3. Regulatory framework of digital asset issuance and distribution market

• As the need to strengthen the stability of the digital asset market and user protection increases, it announced that it will prepare a regulatory system coherent with global regulations.
• It was once again mentioned that the regulatory framework for security tokens will be established through the reform of the Financial Investment Services and Capital Market Act, and those for other digital assets will be established through the pending bills. There are currently 14 relevant bills pending in the National Assembly.
• The regulation measures for digital asset-related businesses (entry, exit, business operation regulation, etc.), market stabilization measures such as unfair trade prevention, investor deposit and digital asset protection, market self-regulatory bodies and governance are mentioned as tasks that need further discussion.

4. Promotion of the blockchain industry

• It announced that the government will support the emergence of innovative companies and services from a technologically neutral perspective and support the promotion of the industry through policy establishment for the development of blockchain technology and the production of professionals.
• The scope, type (including blockchain), and regulatory direction of digital asset-related in