The Financial Services Commission introduced a revision proposal regarding the Enforcement Decree of the Special Act on the Prevention of Loss Caused by Telecommunications-based Financial Fraud and Refund for Loss (“the Act” hereinafter) on July 15.
The use of virtual assets in telecommunications-based financial frauds, such as voice phishing (vishing) scams, has been on the rise recently. However, under the current legal framework, virtual assets are not included as a type of assets qualified for receiving vishing-related damage and loss relief. In this regard, a revision to the Act was approved in March this year to include virtual assets as a type of assets qualified for receiving vishing-related damage and loss relief, and this revision proposal for the Enforcement Decree provides further details as a follow-up to the amended Act.
Key Revision Details
First, the revised Enforcement Decree will provide specific criteria on the method of loss refund and how the amount of loss refund is calculated.
Unlike money, virtual assets carry different values attached to them, which makes it necessary to establish specific standards on the method of refund for stolen assets. In this regard, if the type of asset that was stolen is money, the refund being made will be in monetary unit. If the type of stolen asset is a virtual asset, the refund being made will be in the same type of virtual asset in the same quantity.
If there is a discrepancy between the type of asset that was stolen in the first place and the type of asset that is shown on the account that was used in the fraudulent activity, the refund being made will be in the form of asset that is shown on the account that was used in the fraudulent activity at the time of the freeze of account taking effect.
In the case that there is a mixture of assets qualified for loss refund, the portion of money that was stolen will be paid out in monetary value and the portion of stolen virtual assets will be paid out in market value at the time of the freeze of account taking effect.
Second, the revised Enforcement Decree will provide details regarding the designation of specific entities that are authorized to sell virtual assets that are subject to refund to assist the refund of loss in money for the victims who are not virtual asset users.
In the case that stolen assets were converted into virtual assets prior to the freeze of account taking effect, the refund of loss should take place in the form of virtual assets in principle. However, if the victim has no prior experience in using virtual assets or owns no virtual asset account with a virtual asset service provider, receiving loss refund in virtual assets will be of no use to the victim.
Thus, under the revised Enforcement Decree, specific entities will be designated to more practically assist the process of loss refund for victims. The designated entities will be authorized to sell virtual assets that are subject to refund and convert them into money to be able to pay out to victims in monetary value.
The designated entities should meet all criteria (organizational and human resources) that are deemed to be required for performing user protection and damage relief functions related to virtual assets.
Anticipated Effect and Schedule
It is expected that the revised Enforcement Decree will help to lay a regulatory foundation to more effectively provide remedies for the victims of telecommunications-based financial frauds involving virtual assets. The rules change will help to speed up the refund of stolen assets and ensure more fairness in the process.
The revised Enforcement Decree will enter a 40-day comment period from July 15 until August 24 and go through a successive legislative review and approval process before taking effect from October 1, 2026.
* Please refer to the attached PDF for details.