As South Korea’s ongoing efforts at regulating cryptocurrency continues, a top financial services official said DeFi (decentralized finance) businesses need legal review before they are officially recognized as providers of financial services such as loan-for-consumption.
- At the National Assembly’s annual review, lawmaker Oh Gi-hyoung, member of the National Policy Committee, asked Jeong Eun-bo, Korea’s Financial Supervisory Service (FSS) governor, how DeFi businesses such as virtual asset banks will be regulated. Oh pointed out that Delio, a South Korean virtual asset lending company, has an accumulated deposit of 2 trillion Korean won (about US$1.67 billion) — and requested preemptive measures against possibilities of a bank run.
- Jeong responded that authorities are currently able to review and manage the virtual asset storage and management services, after the revised Act on Reporting and Use of Certain Financial Information required those services to register under the Financial Intelligence Unit (FIU).
- In regard to classifying DeFi in line with existing financial services, the FSS governor said “a legal judgment is necessary to decide whether to accept [DeFi businesses] as a new branch of loan-for-consumption services,” as DeFi businesses provide virtual asset loans while virtual assets are not clearly classified under financial assets. He said the issue needs legal review because acknowledging DeFi as financial services could be misinterpreted as officially recognizing virtual assets as official currency.
- Meanwhile, South Korea, whose focus on blockchain has been mostly centered around cryptocurrency trading, is starting to show more interest in DeFi. In September, a DeFi service by the name of Donkey was launched by South Korean developers, who promised to enhance the scalability of domestic tokens within the global DeFi market. Currently, 13 businesses in virtual asset wallet, storage and management services have reported to the FIU to be registered as a legitimate virtual asset operator.