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South Korea's Financial Services Commission cautions investors against cryptocurrency funds

Thu, 25 Oct 2018, 05:07 am UTC

South Korea's Financial Services Commission (FSC) has issued a warning to the investors, urging them to pay “special attention” when considering investment in cryptocurrency funds.

The regulator, in its note issued to investors on Wednesday, said that as the structure of cryptocurrency funds resemble that of mutual funds, they could be mistaken to be legal investments under the Capital Markets Act, CoinDesk reported.

Under the law, the funds that raise capital from the public must be registered and approved by the FSC. The financial watchdog said that crypto funds are neither approved nor registered.

“Therefore, 'virtual currency funds' are subject to capital market law violation,” the FSC said (loosely translated).

The watchdog further urged financial authorities to consult with the relevant authorities to “take further action on 'virtual currency funds'” to protect the interest of the investors.

In January 2018, the Korea Financial Intelligence Unit (KoFIU) introduced the Virtual Currency Anti- Money Laundering Guidelines. Since then, the KoFIU and the Financial Supervisory Service (FSS) conducted inspections in April on banks for monitoring their compliance with the guideline and proposed a revision to addressing some insufficiencies related with the implementation of the guidelines. The revised guideline was approved by the FSC on June 27 and went into effect on July 10.

In July, the FSC had also revealed its plans to set up a department that will exclusively focus on policymaking initiatives related to the domestic fintech and cryptocurrency industry.

In addition, the FSC banned all ICO-related activities in the country last September. Recent reports suggest that the government is likely to revisit the legal status of ICOs in the country next month.

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