SOUTH KOREA Law and Practice Contributed by: Byung Chang Lee, D&A LLC
7.2 Laws to Protect “Banking Secrecy” The Act on Real Name Financial Transactions and Confidentiality regulates and protects so-called bank - ing secrecy in general. Article 4 (1) of the Act states that “a person who engages in financial institutions shall not share information or data on the details of financial transactions with another without the written request or consent of the title holder” unless there is a court order to submit or a warrant issued by a judge, etc. Typically, a party can file an application for an order to submit financial transaction information with the court during the course of civil or criminal claims in relation to fraud allegations, provided that the judge issues an order in this regard. Through the above procedure, a party can legitimately obtain confidential financial information. 7.3 Crypto-Assets Definition of Virtual Assets in Relevant Rules The Criminal Proceeds Concealment Control Act stipu - lates that “property resulting from a criminal act that falls under a serious crime or property obtained as a reward for the criminal act can be confiscated” (Arti - cle 2 (2)(a), Article 8 (1)). Additionally, the Enforcement Decree of this Act stipulates that “hidden property refers to cash, deposits, stocks and other tangible and intangible property value that is hidden by a person whose judgment on confiscation or collection has been finalised” (Article 2 (2)). Intangible assets that have been acquired through criminal acts that fall under the seri - ous crimes stipulated in the Criminal Proceeds Con - cealment Control Act may be confiscated. Article 2 (3) of the Act on Reporting and Use of Spe - cific Financial Transaction Information newly amend - ed in 2021 stipulates that “a virtual asset means an electronic certificate (including any rights related thereto) that has economic value and can be traded or transferred electronically”. It is intended to provide a basis for securing the grounds for supervision and inspection by the head of the Korea Financial Infor - mation Analysis Institute for the implementation of anti-money laundering obligations, such as reporting suspicious transactions and high-value cash transac - tions by virtual-asset business operators.
Whether a Virtual Asset is an Intangible Property With a Property Value With the recent proliferation of cryptocurrencies such as Bitcoin, and the increasing number of cases of their misuse as a means of hiding assets, municipal govern - ments across Korea are putting pressure on delinquents with a new method called virtual currency seizure. With the revision of the Act on the Reporting and Use of Specific Financial Transaction Information, virtual-asset business operators have to fulfil their respective obliga - tions, such as customer identification and suspicious transaction reporting, to existing financial institutions, thus making asset tracking possible. Related Supreme Court Cases In 2018, the Korean Supreme Court ruled that virtual currency could be confiscated as it was regarded as an intangible asset with property value (Supreme Court Decision 2018Do3619). The question is whether or not Bitcoin is an intangible property with a property value. In this case, the Korean Supreme Court held that: • Bitcoin is a kind of so-called virtual currency that digitally represents economic value and enables electronic transfer, storage and transaction; and • Bitcoin is an intangible asset of property value based on the fact that it was treated as having value by being paid for by advertisers who wanted it. There are increasing numbers of cases in which people apply for provisional seizure by compulsory execution of virtual assets such as Bitcoin. However, as there is no statute related to civil enforcement on virtual assets, confusion is expected when a forced enforce - ment application is requested. Therefore, a study by an incumbent judge proposed that guidelines should be presented in the Korean Supreme Court rules until relevant legislation is implemented. In Korea, there is growing momentum to introduce KRW-pegged stablecoins into the institutional frame - work. Much of the recent discussion has focused on the scope of eligible issuers and on issues of user protection, including, in particular, the scope and management of reserve assets.
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