South Korea moves to include crypto in pension eligibility as central bank tightens exchange safeguards

South Korea’s Board of Audit and Inspection (BAI) has made a request to the Ministry of Health and Welfare to ensure fairness when reviewing who qualifies for basic pension. 

Meanwhile, the Bank of Korea (BoK) is pushing for strict new safety rules, including the introduction of “circuit breakers” for the crypto industry following the February Bithumb incident.

BAI demands fair pension payments 

South Korea’s Board of Audit and Inspection (BAI) has officially requested that the Ministry of Health and Welfare amend its laws to allow virtual assets to be included in the property calculation for the country’s basic pension review.

The BAI released its report on the Actual Status of Monitoring the Operation and Management of the Senior Welfare System. In it, the agency explained that digital assets have clear economic value and that, because the Basic Pension Act does not list them as property, people who own large amounts of digital assets might still qualify for basic pension payments. 

The basic pension is a government subsidy provided to low-income elderly people in South Korea. The BAI argued that digital assets should be treated like any other asset. 

“Even if digital assets are a new form of financial assets that are different from existing financial assets, there is no reason to look at their property value differently,” the audit report stated.

Officials from the Ministry of Health and Welfare agreed with this finding, stating that it is necessary to prevent the payment of basic pensions to relatively high-income earners who do not fall under the lowest 70% of income brackets. 

Currently, there are no legal means for authorities to request information on digital asset holdings from exchanges, prompting the BAI to request that the Ministry revise the law to create a system where this data can be requested and verified.

Strict rules introduced, following Bithumb’s incident

Today, the Bank of Korea released its annual payment and settlement report. The report reviewed the February incident in which a Bithumb employee mistakenly paid out 620,000 Bitcoin (BTC), worth about $42 billion at the time, to customers as a prize, instead of 620,000 won (approximately $460).

The BoK identified a lack of internal controls as the main cause. Employees could pay out Bitcoin without approval from a superior or confirmation from the monitoring department. The exchange also only checked its internal ledger against the actual blockchain balance once a day. 

Cryptopolitan previously reported that a 5-minute reconciliation system to confirm that the balance on an exchange’s ledger is the same as the balance in its wallets is underway. 

The central bank is now requiring crypto exchanges to implement a double-verification system that automatically detects input errors. The BoK also wants IT systems that can check internal and blockchain balances in real-time to block erroneous payments caused by human error. 

The BoK also suggested that lawmakers consider introducing “circuit breakers” for crypto exchanges, similar to those on the Korean stock exchange (KRX) that halt trading when sudden price fluctuations or large, abnormal mass orders occur. 

Beyond introducing stricter regulations, the Bank of Korea is moving forward with plans to build a digital currency ecosystem. 

Shin Hyun-song, the nominee for the Governor of the Bank of Korea, submitted a written response to the National Assembly stating that a central bank digital currency (CBDC) and commercial bank deposit tokens should be the core of the digital currency ecosystem.

“I basically agree with the introduction of domestic won stable coins,” candidate Shin wrote. He went on to say that “maintaining trust in currency is still the most important.” 

Shin stated that, unlike the United States or Europe, South Korea is not a base currency. Therefore, compliance with regulations like customer confirmation and anti-money laundering is very important. He suggested that in the initial stages of issuing a won stablecoin, only a consortium of banks should be allowed before access is gradually expanded.

The smartest crypto minds already read our newsletter. Want in? Join them.