The virtual asset committee finalized the guidelines on disposal of virtual assets by non-profit corporations and virtual asset exchanges, including permission on the issuance of real-name account for the purpose of virtual asset disposal and requirements to prevent money laundering and conflicts of interests.

BACKGROUND

Vice Chairman Kim Soyoung of the Financial Services Commission presided over the fourth meeting of the virtual asset committee on May 1 at the Government Complex Seoul. Joined by relevant ministry officials, agencies, and private sector experts, the committee finalized the draft guidelines on sale of virtual assets by non-profit corporations and virtual asset exchanges, The measure is a follow-up to the roadmap for allowing transactions of virtual assets by corporate entities.

In addition, in response to growing concerns over investor harm caused by extremely volatile movements in virtual assets prices right after they become listed, the so-called “listing pumps”, the committee also discussed proposed revisions to the best practice guidelines for listing.

key revision details

Guidelines for Virtual Asset Disposal by Non-profit Corporations

To ensure the proper level of internal controls and transparency, the guidelines for non-profit corporations will initially allow disposal of virtual assets by entities subject to external audit with five years or more in business operation and require them to establish an internal committee for prior reviews on the appropriateness of the donations and the plans for liquidation into cash.

Given that virtual assets’ easy liquidation into cash is necessary for an adequate use of donated virtual assets, the virtual assets subject to donation will be limited to virtual assets that are traded in at least three Korean won-based exchanges only. Also, the donated virtual assets must be liquidated into cash immediately upon donation.

In order to ensure safeguard measures for anti-money laundering, the guidelines strengthen verification of purpose of the transaction and the origin of funds. Donations and transfers of virtual assets will only be allowed through local Korean won-based exchanges only, which in effect requiring banks, exchanges, and corporate entities to double-check customer due diligence procedures.

Guidelines for Virtual Asset Disposal by Virtual Asset Exchanges

The guidelines for virtual asset exchanges put emphasis on minimizing market impact thereby preventing potential conflicts of interest that may arise between exchanges and their users. Only exchanges officially registered as virtual asset service providers under the Act on Reporting and Using Specified Financial Transaction Information are permitted to sell virtual assets. The permitted transactions are limited to sales of virtual assets for the purpose of covering operating expenses. To minimize market disruption, the virtual assets eligible for sale must be among the top 20 by market capitalization listed on five Korean won-based exchanges. A daily transaction limit - such as less than 10% of the total planned sale volume - will be imposed, and self-trading through the exchange’s own platform will be strictly prohibited.

As part of anti-money laundering safeguards, internal control procedures such as board approval for virtual asset sale plans and prior disclosure obligations will be required. In addition, post-disclosure of the sale results and the use of proceeds will also be mandated.

Guidelines for Sale of Virtual Assets

by Non-Profit Corporations and Virtual Asset Exchanges

Proposed Revision to the Best Practice Guidelines for Listing

The proposed revisions to the best practices for listing focus on strengthening listing standards for virtual assets to address market instability related to those involved in so-called “listing pump” phenomena, zombie coins, and meme coins.

To prevent sharp price fluctuations caused by supply-demand imbalances immediately after listing, so-called “listing pump” phenomena, the revision proposal introduces a requirement for securing a minimum circulating volume before trading begins. In addition, market orders will be restricted for a certain period after trading commences.

In addition, for virtual assets with negligible trading volume or market capitalization (zombie coins), or those with unclear utility or value (meme coins), exchanges will be required to establish their own standards to prevent indiscriminate listings.

Given that the Best Practices for Trading Support serve as a quasi-regulatory framework aimed at protecting virtual asset users, the core elements of the revised guidelines will be incorporated into a potential bill on the comprehensive regulatory framework on virtual assets. 

The committee also discussed the anticipated benefits of institutionalizing Security Token Offerings (STOs). Members agreed that STOs, by utilizing distributed ledger-based account management and smart contracts, will contribute to promoting innovation in the capital market and facilitating the emergence of diverse, non-traditional investment products. There was broad consensus on the need for passage of the related legislative amendments.

Further Plan

Under the guidelines announced today, measures to support the issuing virtual asset sales accounts for nonprofit corporations and virtual asset exchanges will be implemented from June. The revised best practice guidelines for listing will be applicable to virtual assets to be listed after June 1.

Additionally, based on the discussions held today, the FSC and the KoFIU plan to establish customer due diligence measures for virtual asset transactions by non-profit corporations and exchanges within May. As part of the second phase of the Roadmap for allowing transactions of virtual assets by corporate entities, the FSC also aims to announce a plan in the second half of the year for issuing real-name accounts to listed companies and corporations registered as professional investors.

 * Please refer to the attached PDF for details.