On July 19, 2022, the Financial Services Commission (the “FSC”) launched the Financial Regulatory Reform Committee (the “FRRC”), a private organization comprised of experts from the private sector, to examine and pursue various regulatory reform initiatives mainly regarding the digital finance field.

The FSC highlighted its commitment to introduce financial regulatory reforms via the FRRC in response to the recent digital transformation and the so-called “big blur” phenomenon, through which traditional barriers across sectors are becoming blurred.  The FRRC’s objective is to foster an institutional environment where Korean businesses in the financial industry can grow as leaders in the global market.  Comprised of 17 members from the private sector with expertise in the economic, financial, digital, legal, and media sectors, the FRRC is expected to serve a key role in establishing strategies and directions for regulatory reforms in Korea.
 

1.   Key Tasks for the FRRC

During its kick-off meeting on July 19, 2022, the FRRC identified four major areas, nine key tasks and 36 detailed tasks as their priority agenda.

The four major areas are: (i) promotion of the financial industry’s digitization, (ii) establishment of an infrastructure to facilitate digital finance innovation, (iii) overhaul of the domestic capital markets industry to support innovative growth, and (iv) improvement of practices for regulatory supervision, sanction, and inspections.
 

• Regarding digitization of the financial industry, the FRRC specified its plans to (i) promote convergence between the financial and non-financial industries by relaxing or reforming regulations with respect to financial companies’ investment in subsidiaries and credit card companies’ data utilization, (ii) improve the virtual real-name verification system to facilitate the use of external resources and new technologies, and (iii) consider introducing financial intermediary services on online platforms.  During its second meeting on August 23, 2022, the FRRC further discussed introducing financial intermediary services on online platforms, first via pilot-testing, emphasizing the easing of regulatory barriers for financial and fintech companies to offer online one-stop services for different financial and non-financial services, such as banking, insurance, card-related and securities-related services.

• With respect to the establishment of an infrastructure to facilitate digital financial innovation, the FRRC will seek to (i) expand the scope of information sharing and ease regulations around network separation for the growth of businesses based on new technologies, particularly around data and Artificial Intelligence (e.g., MyData and cloud-based services).  They will also (ii) establish a balanced regulatory framework for emerging industries related to digital/virtual assets by enacting the new Framework Act on Digital Assets and allowing financial companies to enter the digital/virtual asset market.
   

The FRRC will continue to hold meetings and discuss the overarching direction as well as details regarding  the new financial regulatory reforms to be introduced in Korea.  Their impact on the regulatory regime is expected to be significant and thus, close monitoring of the FRRC’s discussions would be warranted for the relevant stakeholders such as financial and fintech companies and virtual asset service providers.