South Korea's financial authorities appear to have incorporated into a government draft of the Digital Asset Basic Act an integrated supervision framework under which the Financial Services Commission, the Financial Supervisory Service, the Korea Financial Intelligence Unit (FIU) and the Bank of Korea jointly monitor the digital asset market.

Financial Supervisory Service Governor Lee Chan-jin (이찬진) said during a parliamentary audit of the National Assembly's Political Affairs Committee on Oct. 19 that the draft has not yet been announced but reflects the framework. He said it is not at a completely perfect level, but parts of it have been included.

Rep. Lee Kang-il (이강일) of the Democratic Party said supervisory authority over digital assets is currently split among the FSC, the FSS, the FIU and the Bank of Korea. He said there is a need to strengthen supervisory measures possible under the current system even before second-stage legislation.

He called for using, within legal limits, suspicious wallet information secured by investigative agencies for inspections in cooperation with the FIU. He also urged stronger pre-risk screening and post-management of partnerships between financial companies and digital asset operators.

Lee said the FSS is strengthening its cooperation system with the FIU more than before. He said discussions are also under way on building a related framework and that preparations are almost complete, adding that he would speak once things are sorted out.

The state of anti-money laundering (AML) management at won-based exchanges also emerged as an issue in the audit.

Lee said violations of the Act on Reporting and Using Specified Financial Transaction Information at all won-based exchanges are understood to exceed about 15 million cases. He said authorities should check whether basic AML obligations are functioning properly. He also raised a claim that Coinone has more than 90,000 cases of transactions with unreported overseas operators.

Bithumb's past mistaken bitcoin payment incident was also mentioned. Lee said the FSS had inspected the exchange several times in advance but failed to find ledger management problems, and questioned the effectiveness of inspection and supervision.

A call also emerged to strengthen fit-and-proper reviews and accountability rules for exchange executives. Lee said digital asset operators, unlike financial companies, are not sufficiently subject to rules on governance structure or executive responsibility.

Whether there are links to the financial sector related to the KOK coin case was also put on the list of items to be checked. Lee said he had not identified specifics to that extent and responded in a way that suggested he would look into it further.

Earlier, after Rep. Min Byung-duk (민병덕) of the Democratic Party asked him to check a partnership relationship between a blockchain company and a financial institution that he claimed is connected to the KOK coin case, Lee said he would confirm it and respond.

Once the government draft of the Digital Asset Basic Act is disclosed, a key issue is expected to be how to divide supervisory authority by institution and how to link the FIU's anti-money laundering information with the FSS' inspection and supervision functions.