South Korea currently has no regulation against government officials’ insider trading with the knowledge of cryptocurrency regulations.
The case against an employee of the country’s Financial Supervisory Service (FSS) charged with crypto insider trading has stalled without grounds for punishment.
However, the government has worked out a plan to keep the incident from happening again.
The FSS plays an active role in creating crypto regulations as well as taking a close look at banks for crypto-related money laundering measures.
The employee invested about 13 million won on July 3 of last year and sold over half of his assets on December 11. Then, on December 13, the government declared a set of more stringent regulations, which included a ban on crypto trading for minors and foreigners.
But guilty or not, there is no law to penalize government officials for insider trading of cryptocurrencies. While employees are kept from stock trading using insider knowledge, a senior FSS official was quoted in the site Edaily explaining:
“Currently, there are no provisions in the regulation on virtual currency.”
The rules that are applied to stocks do not apply to cryptocurrencies since they are not acknowledged as legitimate financial assets in Korea. To keep insider trading from happening, Korean prime minister Lee Nak-yeon mandated the creation of a new Code of Conduct to tackle crypto trading by public officials.
The Korean Anti-Corruption & Civil Rights Commission handed down the “Code of Conduct Guide to Cryptocurrency” to the government and public agencies just last week. It adds cryptocurrency to Article 12 of the Civil Servant Code of Conduct which states that:
“Public officials shall not use the information learned during their duties to assist in trading or investing in property related to securities, real estate, etc., or providing such information to others to help them trade or invest.”
The FSS, however, is not bound by the new Code of Conduct. According to the report, the document was not even forwarded to the FSS.
“This guidance document was sent to the central administrative agency, metropolitan area, basic local autonomous body, city and provincial office of education,” an FSS official outlined.
A senior official of the FSS Inspectorate also verified this, saying: “We did not receive any letters of interest.”
This is due to the FSS being under the umbrella of the Financial Services Commission (FSC) and the Securities and Futures Commission under the current law.
The Financial Services Administration Innovation Committee said that “redefining the FSS as a public institution weakens the independence and accountability of supervisory institutions, making it more vulnerable to external pressures such as political parties.”
As the FSS is not a government agency, the Code of Conduct does not cover FSS staff.
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