South Korea’s Financial Services Commission (FSC) has presented a report profiling its new definition of cryptocurrencies, together with proposed procedures for token issuers and punishments for non-compliance.

The suggested rules could enforce strenuous regulations on individuals or platforms that mint non-art NFT’s for trading purposes, as well as decentralized finance projects.

FSC noted items that it had suggested in the Act on the Protection of Users of Cryptocurrency. This Act has been reviewed by the National Assembly. It established policies for token issuers who plan on having their tokens traded on Korean exchanges and also recommended punishments for all those the FSC has deemed to be making “undue profit through market manipulation or trading on undisclosed information.”

First, the report covered businesses such as ICO operators and decentralized autonomous organisations (DAOs) and non-fungible token (NFT), minting services. The FSC requires these entities to file a whitepaper and receive a recommendation form a recognised token evaluation service. They also need to obtain a legal review of their project. Users are also required to be notified about business updates.

NFTs weren’t considered assets that the FSC could regulate in the past. This perception has changed since last week. Although privacy tokens such as Monero and other stablecoins are considered cryptocurrencies by the FSC, they do not consider central bank digital currencies (CBDC), to be cryptocurrencies.

According to the proposed law, defaulters could face a penalty of at least 5 years in prison plus a fine three to five times the amount of “unfair profit” made. A profit earned while a business was operating in violation of law guidelines is unfair profit.

FSC has adopted a new measure to correct deficiencies found in Special Reporting Act ability to adequately protect investors. The Act is what drove most of the country’s crypto exchanges to pack up due to strict requirements to remain in operation.

An industry insider opined that the proposals were positive and “the new law, once passed, will further promote industry development and help protect digital asset investors.”

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