South Korea: Digital assets may be subject to securities law

South Korea’s Financial Surveillance Service (FSS) has hinted that some digital currencies may pass as securities under the country’s case law. FSS Governor Lee Bok-hyun disclosed his position at a local media house as he answered questions related to the Terra-Luna collapse.

“I disagree with the view that some virtual assets do not have parts that can be recognized as financial investment products or securities,” Lee told reporters at FSS headquarters. . “As a lawyer or person in charge of financial affairs, there is an option which, if certain requirements are met, can be considered as guarantees.”

Lee asserted that lawsuits are well within their rights to try to determine whether or not a digital asset can be classified as a security. He added that this prerogative does not rest with regulatory agencies, but caution should be exercised when making such judgments on virtual currencies.

His statements follow prosecutors who view the stablecoin and Terra’s native virtual asset as security. Law enforcement across the country has since filed a lawsuit against Terra founder Do Kwon, who recently received an arrest warrant from the Seoul Southern District Prosecutor’s Office. Earlier this week, there were multiple reports that Kwon’s South Korean passport was set to be invalidated by the Foreign Ministry as the hunt for his capture intensified.

Despite South Korea’s leading role in blockchain adoption and its pro-digital assets president, investor enthusiasm has been muted since regulators stepped up their investigation into exchanges over their role in the Terra saga.

Regulators yearn for virtual assets to be considered securities

The issue of regulators urging lawmakers to recognize virtual currencies as securities has reached a global flavor. Perhaps the United States is a jurisdiction where appeals have increased in recent months.

The United States Securities and Exchange Commission (SEC), headed by Gary Gensler, has argued that several virtual currencies are subject to the Securities Act of 1934 under the Howey test.

In the SEC v. WJ Howey case, the Supreme Court held four prongs in determining whether or not an investment can be passed as a security. Elements include whether there has been an investment of money in a joint venture, with the expectation of profit to be obtained through the efforts of others.

Applying the Howey test, the SEC found that Ripple Labs had sold unregistered securities (XRP tokens) and took the company to court in December 2020. Almost two years later, investors are far from knowing the position virtual currencies regarding securities law.

Watch: BSV panel Global Blockchain Convention, Law & Order: Regulatory Compliance for Blockchain & Digital Assets

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