FSC Chief Signals End to South Korea’s Crypto-Finance Separation Rule

Nine-Year-Old Curbs on Financial Firms’ Entry Into Crypto

“We’ll Review It in Line With Global Changes”

Kim Byoung-hwan, chairman of South Korea’s Financial Services Commission, signaled he may effectively scrap the so-called crypto-finance separation principle that has restricted financial companies from entering the virtual-asset market. The FSC is also reviewing a plan to require financial firms to appoint a chief inclusive finance officer, or CIFO, to oversee those efforts internally.

At a press briefing at the Government Complex Seoul on May 21, Kim said the crypto-finance separation rule was introduced in late 2017 as part of measures to respond to virtual-asset speculation. He said the policy now needs a comprehensive review as global markets move toward institutionalization and legislation. The comments suggest the government may ease restrictions on financial companies’ participation in the crypto market. Kim added that the review would proceed alongside discussions on stablecoin adoption, an overhaul of the regulatory framework for crypto exchanges and a second phase of legislation.

On inclusive finance, Kim laid out a broader plan to redesign the financial system itself. He divided the sector into three layers: institutional finance, policy microfinance and alternative rehabilitation finance. He said mainstream lenders are increasingly serving only top-tier borrowers, pushing people with mid- to low-credit profiles toward policy microfinance and into blind spots in the system. That has entrenched what he described as an “interest-rate cliff,” with banks focusing on safer borrowers instead of their core role of screening risk and assessing future repayment capacity.

The FSC plans to launch an inclusive finance strategy task force as early as June. Under the existing Inclusive Finance Transformation Council, it will set up four divisions covering overall coordination, policy microfinance, the financial industry and credit infrastructure to discuss institutional reform tasks. Measures under review include appointing a CIFO within financial companies and reflecting inclusive-finance performance in evaluation systems and incentives.

Kim also said the banking sector’s jeonse loans to single-home owners holding apartments in the Seoul metropolitan area totaled 9.2 trillion won, or about $6.7 billion, across roughly 59,000 cases. He said the FSC is considering additional regulations targeting single-home owners in the capital region who do not live in those homes. Authorities are discussing how to screen out speculative demand and will review a range of cases to devise measures that work effectively.

Kim also said the government will expand the scope of investments allowed through omnibus accounts for foreign investors from domestic stocks to exchange-traded funds, or ETFs. It also plans to temporarily ease network separation rules for the financial industry starting in June.

On sanctions related to equity-linked securities tied to the Hang Seng China Enterprises Index, Kim said the case marked the first large-scale enforcement action since the Financial Consumer Protection Act took effect and could become a benchmark for similar cases. The facts and the application of the law therefore need to be examined more rigorously, he added.

Cho Mi-hyun/Park Si-on, Hankyung.com reporters mwise@hankyung.com