Virtual asset-related overseas investment, could there be domestic regulatory issues?
Article posted in 2025-03-11 16:32:15 | VEAT
Law firm Veat recently provided legal advice to a domestic company (hereinafter referred to as “the Client”), a new technology business finance company, regarding its investment in an overseas company (hereinafter referred to as “the Target Company”) that holds virtual asset-related licenses and performs businesses such as stablecoin generation, wallet services, and custody services, and regarding the related domestic legal risks and proposed solutions.
Specifically, in this case, it was necessary to review whether the investment by ① a new technology business finance company ② an enterprise holding virtual asset-related licenses ③ and, in particular, an overseas enterprise, was lawful.
1. Regulations on New Technology Business Finance Companies
|
「Specialized Lending Business Act」 Article 1 (Definitions) The meanings of the terms used in this Act are as follows. 14-3. “New Technology Business Finance Company” means an entity registered with the Financial Supervisory Service pursuant to Article 3, Paragraph 2, for new technology business finance. 14-5. “New Technology Business Investment Fund” means a fund established to invest in new technology businesses and is one of the following: a. A fund established jointly by a new technology business finance company and other entities. b. A fund managed and operated by a new technology business finance company |
A new technology business finance company means an entity that comprehensively performs businesses such as investment, lending, management and guidance of technology for new technology businesses, establishment of new technology business investment funds, and management and operation of funds, and is registered with the Financial Supervisory Service.
Such a new technology business finance company must have a certain amount of capital, receive registration from the Financial Supervisory Service, and is subject to the regulations of the Specialized Lending Business Act, including receiving regulations when establishing an investment fund if the entity to be invested in is a new technology business.
Law firm Veat reviewed whether the Client had violated the Specialized Lending Business Act as a new technology business finance company and provided legal advice to ensure that the Client's investment in the Target Company complied with the Specialized Lending Business Act.
2. Regulations on Virtual Asset Businesses
|
「Act on Reporting and Use of Specific Financial Transaction Information」 (hereinafter “Specific Financial Transaction Information Act”) Article 5-2 (Obligation of Customer Verification by Financial Companies, etc.) ① Financial companies, etc. shall take reasonable precautions to prevent money laundering and public funding procurement activities using financial transactions by taking the measures according to the following divisions. In this case, financial companies, etc. shall prepare and operate business guidelines for this purpose. 3. In case the customer is a virtual asset business: To confirm the following items a. Items of subparagraphs (1) or (2). b. Matters regarding compliance with the reporting and amended reporting obligations pursuant to Article 17, Paragraphs 1 and 2. c. Matters regarding acceptance of the notification pursuant to Article 17, Paragraph 3. d. Matters regarding discretionary cancellation of notification or amended notification pursuant to Article 17, Paragraph 2. e. Matters regarding compliance with the following 1) or 2). 1) Management of deposits (meaning monetary deposits received from customers of the virtual asset business in connection with virtual asset transactions) separately from proprietary assets (meaning the business's own assets). 2) Acquisition of information security management system certification pursuant to Article 11, Paragraph 1 or Article 11, Paragraph 1-2 of the “Act on Promotion of Information Communication Networks and Protection of Information” |
The Specific Financial Transaction Information Act obligates financial companies, etc. to confirm certain items when they have virtual asset businesses as customers.
Therefore, Law firm Veat reviewed whether the Client was a financial company, etc., whether the Target Company was a virtual asset business, whether the Client’s investment in the Target Company triggered the customer verification obligations under the Specific Financial Transaction Information Act, and proposed measures for the Client to avoid violating the Act.
3. Matters to Consider When Investing in Overseas Entities
|
「Foreign Exchange Transactions Act」 ① The definitions of the terms used in this Act are as follows. 19. “Capital Transaction” means any transaction or act falling under any of the following: d. Acquisition of real estate in a foreign country or rights related thereto by a resident, or acquisition of real estate in the Republic of Korea or rights related thereto by a non-resident. Article 18 (Reporting, etc. of Capital Transactions) ① A person intending to engage in a capital transaction shall report to the Minister of Strategy and Finance in accordance with the provisions of the Enforcement Decree. However, capital transactions for which foreign exchange stabilization and smooth external transactions are ensured may be reported or not reported afterwards pursuant to the Enforcement Decree. It is necessary to analyze individual and specific situations to determine whether a certain act is subject to reporting under the Foreign Exchange Transactions Act. Law firm Veat thoroughly reviewed whether reporting was required under the Foreign Exchange Transactions Act and relevant regulations, drawing on expertise and know-how accumulated through resolving similar cases, and reviewed whether the Client’s investment was subject to reporting under the Foreign Exchange Transactions Act.
This case highlights the importance of thoroughly analyzing the domestic and foreign regulatory environment when a new technology business finance company invests in an entity performing virtual asset businesses overseas and of blocking legal risks before entering into investment agreements. Law firm Veat provides customized legal advice to various companies and investors in the virtual asset, fintech, blockchain, and financial regulation fields. If you experience legal issues while performing virtual asset-related businesses or entering into investment agreements, please contact Law firm Veat. Law firm Veat will be able to provide you with legal advice optimized for your specific circumstances. This case study can also be found on the Law firm Veat blog. - Is there a problem with domestic regulations for overseas virtual asset investments? Thank you. Law firm Veat |