Recent Developments

Lee & Ko successfully obtained a landmark regulatory interpretation confirming, for the first time, that the offshore issuance of security tokens referencing Korean financial investment products, as well as the related sale of such Korean financial investment products, is not subject to the Act on Electronic Registration of Stocks and Bonds (“Electronic Securities Act”).

The matter concerned a structure under which an offshore institutional investor would acquire Korean won-denominated money market funds (“MMFs”) issued and sold by a Korean financial investment business entity through an offshore fund, which would in turn issue security tokens referencing such MMFs outside Korea and offer them to offshore investors. The principal regulatory issue was whether the offshore issuance of security tokens referencing Korean financial investment products, and the related sale of the underlying Korean financial investment products, could be implemented irrespective of the entry into force of the amended Electronic Securities Act.

The Korean financial authorities concluded that the issuance of the offshore security tokens is not subject to the Electronic Securities Act, given that the issuance takes place outside Korea and cannot be regarded as producing legal effects in Korea. The authorities further confirmed that, even where a Korean financial investment business entity sells financial investment products to an offshore institutional investor with knowledge of the contemplated offshore issuance structure, such sale would not, in itself, be considered a violation of the Electronic Securities Act (Financial Services Commission Regulatory Interpretation, Reference No. 260142).

Lee & Ko provided comprehensive regulatory advice throughout the entire process, including the initial structuring of the proposed arrangement, analysis of the relevant legal and regulatory issues, and preparation and submission of the request for regulatory interpretation to the financial authorities. Through this engagement, Lee & Ko obtained regulatory confirmation that the proposed structure falls outside the scope of the Electronic Securities Act, thereby resolving a significant area of regulatory uncertainty. The interpretation is also significant in that it provides regulatory guidance for assessing offshore security token issuance structures involving Korean financial investment products as underlying assets.
 

Lee & Ko successfully proposed an amendment to the 200% debt-to-equity ratio requirement among the virtual asset service provider (VASP) registration requirements to the Financial Intelligence Unit(KoFIU) on behalf of a client—a prepaid business entity preparing for registration as a virtual asset service provider(VASP)—and the amendment reflecting our proposal has been finalized.

The matter began when Lee & Ko, while assisting the prepaid business entity client with its VASP registration, reviewed a proposed amendment that would strengthen financial requirements for VASP registration. Under the proposed amendment, an applicant for VASP registration was required to maintain a debt-to-equity ratio of no more than 200%. For prepaid business entities, however, prepaid recharge funds are recorded as liabilities, making it structurally very difficult to satisfy the 200% requirement and effectively barring a significant number of prepaid business entities from entering the virtual asset business.

Accordingly, Lee & Ko prepared and submitted a proposal to KoFIU, arguing that: prepaid recharge funds are fully safeguarded in external deposits under the Electronic Financial Transactions Act, are safely managed, and their full repayment to users is guaranteed, making the recognition of their entire amount as liabilities unreasonable; under the then-current proposed amendment, investor deposits held for the purpose of purchasing virtual assets—similar in nature to prepaid recharge funds—had been excluded from liabilities; even in the registration of electronic financial businesses, prepaid recharge funds are not recognized as liabilities; and the virtual asset and electronic financial businesses are both expanding into payment and settlement services, so cross-licensing between the two sectors is expected to become increasingly active. This work required expertise and capabilities spanning not only the virtual asset business but the electronic financial industry as a whole.

This project exemplifies Lee & Ko's accumulated experience in electronic financial services, virtual assets, and regulatory reform proposals. It is also a deeply meaningful case for both sectors, as it led to the reasonable improvement of a regulation that could have become the single greatest barrier to prepaid business entities’ entry into the virtual asset business.

Lee & Ko successfully represented Coinone in obtaining a court order staying the execution of a three-month partial business suspension imposed by the Commissioner of the Korea Financial Intelligence Unit (“KoFIU”).

On April 15, 2026, KoFIU imposed a three-month partial business suspension on Coinone, effective from April 29 through July 28, 2026, pursuant to Article 7(5)(3) of the Act on Reporting and Using Specified Financial Transaction Information, among other provisions, on the ground that Coinone had engaged in virtual asset transfer transactions with unregistered virtual asset service providers. The suspension prohibited Coinone from providing virtual asset transfer services (deposits and withdrawals) to newly registered customers. In response, Coinone filed an administrative action seeking the revocation of the disposition and concurrently applied for a stay of execution.

The key legal issues in this case were: (i) whether there was an urgent need to prevent irreparable harm; and (ii) whether Coinone’s claims on the merits were clearly without merit. In addition, (iii) the matter was exceptionally time-sensitive, as the application was submitted merely two days before the partial business suspension was scheduled to take effect.

Regarding issue (i), Lee & Ko emphasized that if the suspension were to take effect, Coinone would be precluded from acquiring new customers, resulting in an irrecoverable loss of competitive standing. Lee & Ko further argued that if the application were to be denied, the three-month suspension period would have already expired during the pendency of the merits proceedings, rendering any subsequent favorable judgment ineffective in remedying the resulting damages. Regarding issue (ii), Lee & Ko actively argued that Coinone had fully implemented all feasible measures available at the relevant time, thereby precluding any finding of “intent or gross negligence.” Furthermore, regarding point (iii), in light of the imminent effective date, Lee & Ko urgently moved the court to issue a provisional stay, successfully securing an interim stay order within a single day.

Following a thorough review, the court held that difficulties in acquiring new customers, the loss of market participation opportunities, and the impairment of business reputation constitute harm difficult to remedy through monetary compensation, thereby establishing an urgent need for a stay. The court also determined that Coinone’s arguments—including the absence of substantive grounds for the disposition—warranted full adjudication through the merits proceedings and could not be deemed clearly without merit. Accordingly, the court ordered that the effect of the disposition be stayed until 30 days after the date on which judgment is rendered in the merits action.

This case is significant in that Lee & Ko responded swiftly to an administrative disposition carrying severe operational restrictions immediately prior to its effective date, successfully obtaining a stay of execution. The decision provided meaningful and practical protection to Coinone’s ongoing operations pending a judicial determination on the lawfulness of the disposition, effectively precluding irreparable harm.
 

In accordance with the implementation of “Responsibilities Map” under the amendment to the Act on Corporate Governance of Financial Companies of Korea, Lee & Ko provides advice on legal coherence for the BNK Financial Group as well as the subsidiaries of the BNK Financial Group with an aim to prepare or improve executives’ accountability statements, accountability systems, and management measures to fulfill their internal control and management obligations. As a large-scale compliance project at the financial group level, this project is of a great significance as a compliance project with respect to financial holding companies that control and encompass various business sectors such as banks, securities companies, and asset management companies. This project is a leading case to ensure reasonable and appropriate performance of duties on the part of senior management by referring to the UK’s Senior Management & Certification Regime.

In September 2024, Lee & Ko successfully assisted DSRV and BDACS in obtaining their Virtual Asset Service Provider (VASP) registration with Korean financial authorities.

These approvals mark a significant milestone, being the first granted in approximately a year since August 2023. Among roughly 20 companies that submitted VASP registration applications through September 2024, only these two companies, both represented by Lee & Ko, received regulatory approval.

As a virtual asset validation service provider, DSRV partnered with Lee & Ko from the initial stages of preparation. Lee & Ko team provided comprehensive guidance on the scope of ISMS certification and virtual asset business activities, while efficiently managing regulatory inquiries throughout the process.

For BDACS, a virtual asset custody service provider, Lee & Ko team developed a strategic approach that emphasized the company’s unique strengths in the market. Lee & Ko worked closely with the client to optimize their ISMS certification scope and business framework to meet regulatory requirements.

These successful registrations are especially noteworthy given the increasingly stringent regulatory environment for virtual asset service providers, including recent platform-related incidents that have led to heightened scrutiny. Despite the regulatory authorities’ conservative stance and extended processing times, Lee & Ko leveraged its extensive expertise across financial regulations, corporate law, foreign exchange, taxation, and virtual assets to secure these approvals.