South Korea recently introduced new rules surrounding the accounting and disclosure practices of its crypto industry. The new rules were introduced by the top financial regulator in the country in the interest of transparency and investor protection following the turmoil in the crypto market last year. The rules would come into effect in 2024.
According to a press release by the Financial Services Commission (FSC), discussions for the new rules began after South Korea’s National Assembly passed the Virtual Assets Act last month. An amendment was made to the country’s Corporate Accounting Standards, which was followed by further review by the Korean Accounting Standards Board.
The new rules would require cryptocurrency issuers in South Korea to include detailed disclosures about their crypto business in their financial statements. This would include information about internal accounting practices, crypto token sales as well as details of token holdings. The rules would also apply to corporate entities that hold cryptocurrencies.
South Korean firms that hold and invest in crypto tokens would have to disclose details surrounding token classification, proceeds from token sales, and other information regarding token holdings including their book value and market value. The new rules also cleared up the confusion about whether to treat sales of issued crypto tokens as profit. Under the amended regulatory regime, such sales would be recognized as profit after the allocation of tokens and associated incentives is completed.
The Financial Services Commission’s new rules came with the following warning to South Korean crypto investors:
Since the volatility or uncertainty of the virtual asset itself does not decrease just because the accounting standards for virtual assets have been established, it is necessary to make careful judgments about investing in virtual assets at your own risk.
The Korean Accounting Standards Board approved the amendments on July 7, 2023. The new rules are expected to promote the country’s crypto industry and protect crypto investors who account for a significant chunk of the global crypto market.
