Financial Regulator of South Korea Warns Investors Against Cryptocurrency Funds
The Financial Services Commission (FSC) - the topmost regulator of South Korea has issued an warning to investors over investing in cryptocurrency funds. On Wednesday, October 24, the FSC issued an official notice to investor.
The notice read that investors should maintain caution with cryptocurrency funds which have similar structure to mutual funds. Such crypto funds are designed with a motive into making investor believe that they are legal investments operating under the South Korea’s Capital Markets Act.
According to the law, public funds which raise capital from the market should have a mandatory registration and approval with the FSC. However, the financial regulator noted that the crypto funds are neither approved nor registered. The FSC wrote: "Therefore, cryptocurrency funds are subject to Capital Markets Act violation”.
The Financial Services Commission further notes that it will take necessary action to protect the investors from the risks of incurring potential financial losses. To act on this matter, the FSC will hold consultations with relevant authorities.
Ten days back, WorldCoinIndex reported that South Korea would finalize its decision about ICOs by the next month of November. The Korean lawmakers have been presenting different views about ICOs and how they should be traded in the country’s financial market.
However, FSC chairman Choi Jong-ku has voiced a negative tone towards ICOs saying: “Although many people call for the government to allow initial coin offerings, there are still uncertainties related to such a move as well as the possibility of serious fallouts.”
The FSC chairman said that the ongoing uncertainties surrounding ICOs. Moreover, citing other countries banning ICO fundraising method, the chairman said that the implications of ICO causing potential damage to investors are “too serious and obvious”.
Last week itself some South Korean regulators reviewed crypto funds issued by an exchange named Zeniex. However, based on the note to investors, the FSC has ultimately decided to hand over the Zeniex case to prosecutors.
As cryptocurrencies and blockchain continue to progress, the FSC’s involvement in these sectors continue to grow simultaneously. In July the FSC announced about setting a new department called the Financial Innovation Bureau to look after the developments happening in the the country’s domestic blockchain and cryptocurrency space.
Describing the role of the Bureau, the FSC regulator said: “The FSC plans a major organizational reshuffle to better protect financial consumers and proactively respond to financial innovation in the Fourth Industrial Revolution era. The new Financial Innovation Bureau will also be tasked with policy initiatives for financial innovation, such as innovating financial services using fintech or big data, and responses to new developments and challenges such as cryptocurrencies.”