In briefThe Korean financial regulator has ordered its employees to file reports on their crypto investments. In December 2017, a Financial Supervisory Service employee reportedly made a profit trading crypto ahead of an announcement of government cryptocurrency policies.
The Korean Financial Services Commission (FSC) has ordered FSC officials dealing with cryptocurrency policies to file reports on their own crypto investments.
According to Yonhap News Agency, those who must file reports include FSC employees whose role includes developing the country’s virtual currency policies and managing cryptocurrency exchange activities, as well as those in charge of monitoring and analyzing suspicious cryptocurrency transactions, and managing technology developments.
Officials at those departments are ordered to file reports on their cryptocurrency investments by May 7, 2021. An FSC official speaking to Yonhap News Agency is reported as calling it a “reminder of the existing code of conduct” in the wake of recent personnel shifts.
Under South Korea’s Capital Markets Act, FSC employees are allowed to use only one securities firm account for trading and are restricted to 20 stock trades within a three-month period. Senior-level officials are not allowed to trade stocks at all and can invest only in exchange-traded funds (ETFs) or overseas stocks.
When it comes to cryptocurrencies, however, there is no formal law in place; instead, an FSC internal rule obliges employees to report to the agency’s chairman on their investments. The document also states that they should not invest in digital assets when in possession of information that is yet to be made public, but these measures are not binding, and penalties for violating them are mild.
The December 2017 incident
According to Yonhap News Agency, in December 2017 an employee of the Financial Supervisory Service made significant profits from cryptocurrency trading before the official announcement on the policies and regulatory frameworks introduced by the government of South Korea later that year.
The employee’s role involved working on the government’s cryptocurrency countermeasures program, and they reportedly made a profit of over 50% by buying and selling cryptocurrency ahead of the announcement of the measures.
Those measures were implemented soon after the price of Bitcoin reached $20,000 for the first time, and included the introduction of stricter KYC/AML rules for investors, as well as a ban on trading cryptocurrencies on local exchanges for foreigners and minors.
Shortly before the announcement, rumors circulated that the government of South Korea was about to completely ban cryptocurrency trading within the country–something the authorities eventually refuted.
Later that same month the authorities conducted on-site inspections of South Korean major cryptocurrency exchanges, including Bithumb, Coinone, Korbit and Upbit, with false reports that the government would close them down being partly responsible for the price of Bitcoin crashing by 40% to below $11,500 in just 24 hours.
The news of the FSC’s order to employees comes in the wake of reports that South Korea is set to strengthen guidelines on overseas cryptocurrency transactions, with the country’s government expressing concerns over “speculative trading” and the possible use of Bitcoin in illegal activity.