The South Korean Financial Services Commission (FSC) has announced that local companies will be mandated to disclose their cryptocurrency holdings from next year as new accounting rules come into effect.
According to an official release, the new rules apply to crypto asset issuers and companies that hold such tokens for investment purposes.
The FSC made the decision after reviewing the country’s corporate accounting standards with the Accounting Standards Committee on July 11. Both entities agreed that legal ownership be considered alongside economic aspects when making accounting disclosures. However, since the local crypto sector has no clear accounting guidelines, firms may fail to provide accurate information.
Hence, the South Korean government has decided to improve accounting transparency related to crypto transactions to obtain clear and detailed information from affected firms.
“In the future, as accounting for virtual assets becomes clearer and disclosure of annotations is strengthened, it is expected that useful information that is comparable and reliable between companies will be faithfully provided from the perspective of users of accounting information, and there are differences between the company and external auditors regarding the interpretation of accounting standards,” the FSC said.
The financial regulator acknowledged that while companies that develop and issue cryptocurrencies make some financial disclosures in their white papers, the reliability of the information cannot be guaranteed. From January 1, 2024, information such as crypto assets’ volume and market value, risks like hacking, and their prevention will be provided.
The FSC intends to implement the accounting supervision guidelines immediately after publication and apply the revised standard from the first business year starting next January. The agency will also distribute audit procedure guidelines for external auditors when examining companies that hold or issue crypto assets.
The latest development follows South Korean lawmakers’ passage of the Virtual Asset User Protection bill on June 30. The legislation was created to protect crypto investors and outlines penalties for unfair trading practices like market manipulation and the use of private information.
The new rules also give the FSC and Bank of Korea authority over crypto operators and custodians, enforcing compliance requirements like reserve funds, detailed record keeping, and insurance coverage.