South Korea’s FSC Seeks to Add Virtual Asset Law to Regulatory Sandbox

South Korea’s Financial Services Commission said June 22 that it will expand the scope of its financial regulatory sandbox and review adding the Virtual Asset User Protection Act and other laws to the list of statutes eligible for regulatory exemptions.

The FSC unveiled measures to improve the sandbox program at an event in Seoul on June 19 titled “Fintech Beyond Regulation, Financial Transformation That Changes the Game.” Innovative financial service providers, experts and officials from related institutions attended and discussed the program’s future direction.

Vice Chairman Kim So-young called the regulatory sandbox a key framework for broadening participation in the financial industry, launching consumer-centered services and driving the digital transformation of financial regulation. He also said the system has shown limits in supporting the growth of innovative companies and helping them establish themselves within the regulated financial system, underscoring the need for reform.

The FSC plans first to widen the range of laws subject to regulatory exemptions. It said the current framework has struggled to uncover new services that can respond to changes in finance and technology. The agency will therefore pursue the inclusion of laws tied to new financial sectors and digital finance infrastructure, including the Internet-Only Banks Act and the Virtual Asset User Protection Act. Revisions to the related enforcement decree are due to begin in the third quarter of this year.

The commission also plans to revamp its review system by tailoring screening procedures to the characteristics of each proposal. Items facing little disagreement will be processed more quickly, while a new expert committee will be created to strengthen preliminary review.

The FSC also said it will expand “planned sandbox” programs, under which the government directly designs policy initiatives such as artificial intelligence-based financial services and the easing of network separation rules. It also plans to strengthen follow-up management to support the commercialization of innovative financial services and their incorporation into the formal financial system.