SOUTH KOREA Law and Practice Contributed by: Jongbaek Park, Seungil Hong, Seyeong Im and Eric Jeong, Bae, Kim & Lee LLC
9. Regtech 9.1 Regulation of Regtech Providers
to obtain stablecoin issuance licences. Banks are also interested in participating in central bank-led digital currency experiments and in limited internal settle - ment tokens. In this context, the Bank of Korea has been continu - ally advancing pilot projects relating to central bank digital currency (CBDC), through which it is testing how a digital Korean won could be integrated into the existing financial system. The Bank of Korea’s CBDC is designed less as a direct substitute for pri - vate stablecoins and more as a form of public infra - structure aimed at strengthening the stability and crisis-response capacity of the payment and settle - ment system. Private financial institutions, in turn, are using these experiments as an opportunity to explore potential future integration with the commercial bank - ing system. In the asset management business sector, interest in bitcoin exchange-traded funds (ETFs) and digital asset investments continues to grow in line with global market trends. Although the establishment and listing of spot bitcoin ETFs is not yet permitted in Korea, asset managers are gaining market exposure through indirect investment structures, such as investments in overseas-listed ETFs or in companies engaged in digital asset-related businesses. In addition, there has been a gradual increase in cases where invest - ments in digital assets or related businesses are made through private funds targeting professional investors or through overseas special purpose vehicles. These structures may be seen as pragmatic choices for man - aging regulatory risks associated with price volatility, custody and valuation issues. Securities companies regard blockchain-based tokenised securities (STOs) as a next-generation capi - tal market infrastructure. Accordingly, they have shown strong interest in building platforms that support the issuance and distribution of STOs. The government has also made clear its policy direction of incorporat - ing STOs into the institutional securities framework through amendments to the FSCMA and the Act on Electronic Registration of Stocks and Bonds (the “Electronic Securities Act”). Under this structure, as a key feature of the approach in blockchain adoption in Korea, blockchain is utilised as a distributed ledger
While regtech has continued to develop its presence and grow in importance, there is no regulation in Korea that relates specifically to regtech providers. Regtech service providers are therefore regulated under the existing legal framework depending on their activities for now. 9.2 Contractual Terms to Ensure Performance and Accuracy There is no regulation that relates to the performance and accuracy of the services of regtech providers. The contractual terms sought by financial service firms with regtech providers are usually driven by internal regulations of the financial services firms and may vary depending on the specific type of service pro - vided by each regtech provider. 10. Blockchain 10.1 Use of Blockchain in the Financial Services Industry In the securities market industry, blockchain technol - ogy is currently being introduced on a gradual basis as a means of enhancing the efficiency and transpar - ency of financial infrastructure, while maintaining the existing framework of traditional financial regulation. Financial authorities and financial institutions tend to view blockchain not as a tool to replace the existing financial order, but rather as an instrument to advance capital markets and payment and settlement systems. As a result, although its adoption remains limited, practical use cases within the institutional financial system are steadily expanding. In the banking sector, there is significant interest in KRW-based stablecoins or token structures linked to bank deposits. This interest is largely driven by the objective of reducing costs and settlement times in cross-border remittances and inter-corporate settle - ments and can be understood as a strategic effort to enhance competitiveness in global payment infra - structure. Nevertheless, in anticipation of the possi - ble passage of bills currently pending in the National Assembly, a number of banks are forming consortia
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