2024 Accounting Issues Symposium: Virtual Asset User Protection Act

The 2024 Accounting Issues Symposium focuses on addressing accounting challenges stemming from the new Virtual Asset User Protection Act.

### 2024 Accounting Issues Symposium Overview
The symposium, hosted by Chosun Biz, focuses on **major accounting issues** arising from the Virtual Asset User Protection Act. Key speakers include industry leaders and professors, discussing the act's **impact** and the need for **effective accounting guidelines**. The event aims to foster **constructive discussions** and provide **solutions for the evolving virtual asset market**.

### The Evolution of Virtual Asset Regulation
The term "**virtual asset handling business**" was initially used, reflecting a **cautious regulatory stance** due to the association with crime. The term was changed to "**virtual asset service provider**" in 2021, introducing key obligations for these providers, including **reporting and anti-money laundering**. The User Protection Act for Virtual Assets, enacted in 2024, aims to **regulate the market and protect users**, marking a **significant step towards comprehensive legislation** in the virtual asset industry.

### The Difference Between Virtual Assets and Digital Assets
The term "**virtual assets**" originates from the Financial Action Task Force (FATF) regulations aimed at preventing money laundering, which has led to its translation into Korean as **가상 자산**. The Virtual Asset Act focuses on two main pillars: **protecting user assets** and **regulating unfair trading practices**, with specific regulations for cash and virtual assets. The law mandates the **separate holding of user assets**, prioritizes **payments to users in case of an exchange's bankruptcy**, and requires **strict security standards** for any entrusted management of virtual assets.

### Regulations for Protecting User Assets in the Virtual Asset Market
The law imposes **strict penalties for unfair trading practices** in the virtual asset market, including **imprisonment and heavy fines**. Virtual asset exchanges are designated as **gatekeepers**, responsible for **monitoring abnormal trading** and **blocking deposits and withdrawals** to protect users. The law also emphasizes the importance of **self-regulation within the industry** to fill regulatory gaps and ensure a **smooth transition to the next stage of legislation**.

### Self-Regulation and Corporate Participation in the Virtual Asset Market
Exchange associations are implementing self-regulatory measures to address regulatory gaps, with a focus on **trading support and internal controls**. The unclear legal nature of virtual assets poses challenges for **user protection and smooth business operations**, highlighting the need for **specific measures and in-depth discussions**. The lack of real-name verification accounts for corporations is preventing their participation in the market, which is crucial for **stabilizing liquidity and reducing market volatility**.

### Promoting On-Site Trading and Accounting Issues for Virtual Assets
The tax system needs to **alleviate the burden on on-site trading** to prevent users from opting for overseas exchanges. The country's tax payment system is notably **convenient**, but platform development is necessary for **effective tax collection**. There are currently **no international accounting standards** for virtual assets, and the Financial Supervisory Service has issued guidelines for their accounting treatment, effective from **2024**.

### Accounting for Virtual Assets: Guidelines and Challenges
The supervisory guidelines for listing virtual assets on financial statements have been expanded to include **utility and payment tokens**, in addition to cryptocurrencies. Holders of these tokens are advised to classify them as **inventory or intangible assets**, depending on their intended use. The determination of an **active market for revaluation purposes** and the definition of **contractual relationships for token acquisition** are key areas of ambiguity in the accounting treatment for virtual assets.

### Accounting Treatment of Contracts with Bitcoin as Underlying Asset
Contracts based on Bitcoin as the underlying asset can lead to different accounting treatments, potentially **not being classified as financial products**. The introduction of supervisory guidelines has clarified some issues, but challenges remain for issuers in **handling accounting**. The nature of the obligations of virtual asset issuers and the expectations of holders create complexities in determining **clear responsibilities and revenue recognition**.

### The Issuer's Responsibility in Service Supply and Token Securities
The issuer is responsible for supplying services, with **revenue recognized at that time**, and the supervisory guidelines provide a framework for **performance obligations**. The discussion around token securities highlights the need to **analyze individual rights and obligations**, especially in cases of **rental income and profit sharing**. The acquisition and re-acquisition of tokens by the issuer, along with the issuance of reserved tokens, raise significant questions about the **ownership and classification of these tokens as assets**.

### The Complexity of Classifying Tokens as Assets
Gift certificates with obligations cannot be classified as assets, raising questions about **tokens with remaining obligations**. The issuance of tokens and their potential economic value before market exchange complicate the asset classification for issuers. The split between domestic and foreign issuing entities due to ICO bans creates ambiguity in recognizing assets, while the management of virtual asset transactions poses **challenges for accounting and auditing**.

### Audit Guidelines and Panel Discussion on Virtual Assets
The aviation association presented audit guidelines, highlighting **risks related to coin ownership and wallet verification**. Internal controls for wallet key management and the **accuracy of reported balances** are crucial for financial auditing. The panel discussion, led by Professor Park Jong-seong, features experts sharing insights on the **impact of financial regulations and disclosure best practices** in the virtual asset industry.

### The Impact of the Virtual Asset User Protection Act on Accounting Practices
The lack of clear standards for virtual asset accounting has led to **inconsistent practices among companies**. The Virtual Asset User Protection Act aims to **strengthen regulations and clarify the accounting treatment** of customer virtual assets. The act's introduction is expected to **diminish the debate over recognizing virtual assets as liabilities** and provide **clearer guidelines for accounting practices** in the industry.

### Consolidation of Virtual Asset Supervision Guidelines
The content related to virtual asset supervision has been organized to address **intangible assets**, **inventory assets**, and **fair value assessments**. While not adhering to the supervisory guidelines may not lead to **immediate action**, violating the standards outlined in these guidelines could result in **consequences for the company**. There is a lack of guidance on accounting for lending or borrowing virtual assets, and the current atmosphere for auditing companies in this sector has evolved, with a focus on **establishing internal controls** and **gaining trust**.

### Challenges in Auditing Virtual Assets and Self-Regulation
Auditing virtual assets is challenging due to their unique characteristics, with issues related to **authenticity and ownership** proving difficult to verify. Mid-sized accounting firms struggle to develop auditing techniques for virtual assets due to limited resources, but collaboration and training programs with larger firms aim to **bridge the gap**. In South Korea, self-regulation has been implemented to address issues in the virtual asset market, but gaps in legislation and the need for **clear standards** highlight the ongoing importance of self-regulation.

### The Need for Self-Regulation and Policy Improvement
Self-regulation is necessary in certain areas, and observing its evolution in countries like Japan can provide **insights for future integration into legal frameworks**. The current negotiation of self-regulation among a small number of member companies may become **complex as more businesses enter the sector**. Key areas for improvement include the issuance of **real-name verification certificates for corporations**, addressing the **legal ambiguity of virtual asset transactions**, and establishing **clear standards for white papers and token securities**.

### Challenges in Regulating Token Securities
The designation of **innovative military services** is rare, leading to difficulties in issuing **token securities**. There is a lack of established criteria for treating token securities as **financial products**, causing confusion among issuers. The introduction of regulations may **contract the market in the short term**, but is essential for **long-term growth and stability** in the virtual asset industry.

### 2024 Accounting Issues Symposium: Addressing Virtual Asset User Protection and Regulatory Challenges
* 🎤 Welcome to the 2024 Accounting Issues Symposium, hosted by Park Se-jeong, where we will explore **major accounting challenges** arising from the newly implemented **Virtual Asset User Protection Act**.
* 👏 The symposium features key speakers, including Kim Jae-jin from the Digital Asset Exchange Joint Council and various experts who will discuss the **implications of the new law on the accounting sector**.
* 📜 The Virtual Asset User Protection Act, which came into effect this summer, aims to **protect virtual asset users and establish a sound market order**, yet significant accounting issues remain unresolved, such as **expense tracking and acquisition cost calculations**.
* 🔍 Chairman Choi Woon-yeol emphasized the importance of this law in **safeguarding user rights and preventing unfair trading practices**, as well as the need for **continuous monitoring by virtual asset exchanges**.
* 💼 The act comprises five chapters and 22 articles, focusing on **user asset protection** and the regulation of **unfair trading practices**, marking a **significant first step towards comprehensive legislation** in the virtual asset market.
* 💰 User assets, including cash and virtual assets, must be kept separate from business assets, ensuring that in cases of bankruptcy, users have **priority in reclaiming their funds**.
* ⚖ The law introduces strict penalties for unfair trading practices, with penalties including **imprisonment and fines**, while also placing the responsibility of **market monitoring** on virtual asset exchanges.
* 📈 As the virtual asset market evolves, discussions on further legislation and self-regulatory measures are essential to **address gaps and ensure a fair and transparent trading environment for users**.

### Navigating the Complexities of Virtual Asset Accounting and Regulation
* 📊 As a taxpayer, the effectiveness of the tax payment system is contingent upon the **development of a platform that simplifies withholding tax and related processes** for convenient tax payments.
* 📈 The implementation of the **Virtual Asset User Protection Act**, which has been in effect for a month, requires market establishment and the **collective responsibility of companies** to ensure its success.
* 📜 Hyun-seung Im, Executive Director of Quality Management at Samjeong Accounting Firm, discussed the **lack of international accounting standards for virtual assets** and the **complexities faced by companies in this sector**.
* 📝 The Financial Supervisory Service has issued guidelines for accounting treatment of virtual assets, set to be implemented in 2024, addressing the **classification of these assets as either inventory or intangible assets**.
* 🔍 The guidelines clarify that virtual assets should be accounted for based on their **acquisition method**, with specific treatment for **utility tokens** and **payment tokens**, while emphasizing the importance of **fair value assessments**.
* 💼 Issuers face significant challenges in accounting for obligations related to virtual assets, as obligations can be **ambiguous and often lack clear responsibility**, complicating revenue recognition standards.
* ⚖ The discussion also highlights the need for **robust internal controls** and **comprehensive management of wallets** to ensure **accurate accounting and auditing** of virtual assets, amidst the **anonymity and volatility** of the market.
* ☕ Following the presentations, a panel discussion will delve deeper into these topics, allowing for **further exploration of the complexities surrounding virtual asset accounting and regulation**.

### Insights from the 14th Symposium on Accounting Issues in the Virtual Asset Industry
* 🕊 The session began with **20 minutes of funeral arrangements** before transitioning to a panel discussion featuring six panelists, including the moderator, **Professor Park Jong-seong from Sookmyung Women's University**.
* 📱 Attendees were encouraged to submit questions via a QR code or a text link, with selected questions receiving **gifticons as an incentive for active participation**.
* 💬 The discussion highlighted the recent implementation of the **Virtual Asset User Protection Act**, which aims to **enhance user protection** and **clarify accounting practices** in the virtual asset sector.
* 👥 Professor Ahn Seong-hee emphasized the impact of the act on exchanges, particularly regarding the **recognition of customer virtual assets as liabilities** and the need for **clear accounting guidelines**.
* 🔍 Kim Nam-hoon from Dunamu expressed that while the new guidelines **reduce uncertainty**, they also impose **short-term burdens on companies**, which could lead to **market contractions** as some businesses may struggle to comply.
* ⚖ Son Hee-won from the Financial Supervisory Service clarified that supervisory guidelines do not create new standards but rather **consolidate existing ones**, indicating that **non-compliance could lead to disciplinary actions** based on accounting standards violations.
* 📊 Attorney Kim Hyun discussed the necessity of self-regulation within the industry, noting that while it has been effective, there is a need for **clearer legislative frameworks** to address gaps and **improve market stability**.
* 👏 The symposium concluded with an acknowledgment of the **importance of balancing regulation and industry growth**, as participants were encouraged to **continue engaging with the evolving landscape of virtual assets**.

LiveWiki

2024 회계현안 심포지엄

2024 회계현안 심포지엄