Successful Completion of the VASP Registration Requirement Relaxation Project

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.