South Korea takes a stern stand on crypto with this new directive
- The regulator was aiming to align crypto reporting standards in line with traditional financial reporting.
- South Korea has passed laws around crypto regulations in recent months.
The South Korean regulator has asked companies to disclose their crypto holdings and issuances beginning next year. The national regulator, the Financial Services Commission (FSC), issued the notification via a press release on 11 July.
According to the latest rules, companies must identify in their financial statements the crypto assets they own or issue. In addition, companies will also need to include their expected monetary worth in these statements.
With this step, the FSC is aiming to align crypto reporting standards in line with traditional financial reporting.
In June, South Korea passed the Virtual Asset User Protection Act to enforce laws against market manipulation and curb insider trading in the crypto industry. The country also passed the Kim Nam-guk Prevention Law in May that obligates lawmakers and high-ranking public officials to report on their crypto assets.
While the International Financial Reporting Standards (IFRS) lag behind market changes in terms of accounting principles applied to cryptocurrencies, the regulator stated that the enactment of the latest laws regulating and protecting crypto assets has spurred the need for new accounting rules that resolve uncertainties in local markets.
An official from the regulatory body said,
“This will provide readers of corporate financial statements with more credible and reliable information. It is also expected that disagreements between companies and external auditors will decrease, with a lesser amount of uncertainty in accounting.”
As transactions in virtual assets have grown in popularity, their impact on corporate accounting has also grown. But financial statements of companies do not include correct details regarding corporate holding of crypto assets, as per the FSC.
The information on crypto assets for fiscal year 2023 will be included in the commentary section of the quarterly financial statements published by companies as early as next year.
As per a local news report published in March, the citizens of South Korea transacted $4.3 billion through “illegal” crypto exchanges in 2022.
The overall amount of funds caught in financial crimes stood at $6.2 billion in 2022. Crypto transactions comprised almost 70% of all the illicit money traffic captured by the officers.