South Korean politicians are raising concerns over cryptocurrency brain drain, and they are calling on public officials to stop joining crypto companies for bigger paychecks.
According to a Financial Times report, an increasing number of financial regulators and police officers are leaving for crypto firms as the industry bolsters its compliance divisions.
“Dozens of former public officials like policemen, Financial Services Commission/Financial Supervisory Service officials, advisers to lawmakers, and prosecution officials have joined crypto exchanges in recent years to deal with regulators,” said a crypto company executive.
In recent weeks, a mid-level official at the country’s Financial Services Commission (FCA) quit to join one of the biggest cryptocurrency exchanges in South Korea, Bithumb.
“It is like leaving fish to a cat,” said Roh Woong-rae Roh, a member of the parliament’s labor and environment committee.
“As regulations related to crypto assets remain weak, we are seeing lax morals in some public officials including financial regulators.”
According to Roh, the move is “highly inappropriate” because the FCA is in charge of regulating crypto exchanges. Under the Public Service Ethics Act of South Korea, retiring high-ranking government officials are restricted from accepting new jobs in the private sector relevant to their former work.
South Korea’s crypto ecosystem is dominated by only four big exchanges; the largest one is Upbit, along with Bithumb, Coinone, and Korbit, which account for over 90% of the country’s total crypto trading volume. The government has only allowed these four exchanges to continue their Korean won (KRW) based crypto trading after they secured bank accounts.
“The big players are offering handsome incentives for regulators to scout them in order to make future rule changes more favorable to them,” said Lee Chul-Yi, head of mid-sized exchange Foblgate.
Recently, the National Assembly passed a bill to delay the planned taxation of capital gains, 20% on the annual gain of over 2.5 million Won ($2,116), from cryptocurrency trading by one year, to 2023.