President Lee Jae-myung of South Korea has abandoned his campaign promise to reform the country’s financial authorities. This move creates uncertainty for future cryptocurrency regulations, which were anticipated to be a critical element of the reform.
The government, ruling party, and presidential office have decided to reevaluate the proposed reforms of the financial authorities entirely.
Postponement of ‘Mofia’ Reform Indefinitely
Consequently, the existing structure of the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) is likely to remain unchanged. Han Jung-ae, the chief policymaker of the ruling Democratic Party, communicated this announcement to reporters at the National Assembly on Thursday.
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The reform initiative initially arose from criticism regarding the excessive power and size of the Ministry of Economy and Finance and the financial authorities. In Korean political arenas, officials from the Ministry hold significant influence.
Thus, they are often dubbed the “Mofia,” a blend of the Ministry’s name and the term “mafia.”
President Lee Jae-myung’s pledge to reform the “Mofia” received substantial public backing. The plan encompassed various strategies to lessen the scope of the Ministry of Economy and Finance and the financial authorities.
Initially, the government and ruling party planned to dismantle the FSC, separating its policy and supervisory roles. The financial policy duties of the FSC were intended to transition to the Ministry of Economy and Finance, while a new agency focused on consumer protection would oversee financial supervision.
A separate Budget and Planning Office was proposed to be established under the Prime Minister’s office within the Ministry of Economy and Finance. However, all of these plans have now been abandoned.
Significant U-Turn on Crypto Regulation
This abrupt change has left the South Korean cryptocurrency sector feeling confused. The industry was keenly awaiting the decision on which agency would take responsibility for crypto regulation, a critical consideration post-restructuring.
There are rising concerns that the conversation about legalizing a Won-backed stablecoin will be neglected. Many domestic banks, credit card companies, and fintech firms are already preparing to launch their own stablecoins.
Over ten banks, including the five largest commercial banks, have come together to form a council aimed at collaborating on a joint stablecoin, considering issuing it through a joint venture.
