South Korea to Include Crypto, Unlisted Shares in New Start Fund Asset Reviews

South Korea will include virtual assets, or cryptocurrencies, and unlisted shares in asset reviews for the New Start Fund, a debt restructuring program for small business owners and the self-employed. The change is meant to better reflect borrowers’ actual repayment capacity and improve fairness in the debt workout system.

The Financial Services Commission said June 25 that it held a meeting with Korea Asset Management Corp., or Kamco, to review the fund’s operations and discuss institutional improvements spanning asset reviews, debt restructuring and receivables management, according to Yonhap News.

Under the revised rules, investment assets such as cryptocurrencies and unlisted shares, which had not been fully captured in asset reviews, will be included in screening. Reviews had previously centered on financial asset data submitted by applicants and income and property records available through the government’s shared administrative information network, making investment assets difficult to verify.

The commission said it has reflected crypto holdings in asset reviews since January after consultations with South Korea’s five largest won-denominated crypto exchanges. Applicants identified as exchange users must submit certificates of their crypto balances. Since May, authorities have also required applicants to submit details of their unlisted shareholdings for use in the reviews. Unlisted shares in companies directly operated by the applicant are excluded.

After amendments to the Credit Information Use and Protection Act take effect on Aug. 13, government debt adjustment agencies will regularly receive information on cryptocurrencies and unlisted shares from relevant institutions and carry out follow-up verification. If an applicant is found to have understated assets or received excessive debt relief, authorities may cancel the agreement and recover the debt.

The commission will also revise debt adjustment standards. The minimum principal reduction rate for borrowers with stronger repayment capacity will be lowered to 30% from 60%, with reduction rates applied according to ability to repay. Support for vulnerable borrowers with weaker repayment capacity will remain unchanged.

Receivables management will also be strengthened. Kamco has operated a dedicated asset investigation team since February to check whether applicants falsely reported assets or deliberately reduced them by giving them away or selling them just before applying for debt restructuring.