South Korea should seek international cooperation to address potential risks arising from digitization in the financial sector, a top financial regulator said on Monday.

“Financial innovation through digital technology is significantly improving productivity in the financial sector by reducing transaction costs and enabling personalized services through data accumulation,” Financial Services Commission (FSC) Vice Chairperson Kim So-young said. “But it is necessary to establish appropriate regulatory frameworks to ensure the continued positive effects of digitization and address the risks that new technologies may bring and to actively respond to consumer protection.”

Kim made the remarks during a roundtable discussion on digital finance in ASEAN at the Korea Federation of Banks building in Jung District, central Seoul, on Monday. The event was organized by the FSC, Organization for Economic Cooperation and Development (OECD), and Korea Institute of Finance.

Participants shared the progress of digital finance policies in each country and discussed ways to address the new risks associated with financial digitization and the direction of development.

“We need regulatory frameworks to counter financial security threats such as cyber hacking and financial information leakage, as well as to ensure the reliability and ethics of artificial intelligence (AI) usage,” Kim said. “Given the borderless nature of digital transactions, sharing global financial practices is crucial.”

Kim urged the international community to actively collaborate and lay down regulations on investment in virtual assets in particular.

“We need regulations on investment in virtual assets to prevent these assets from compromising the stability of financial markets and to ensure investors receive protection at the level of financial markets,” Kim said. “The regulatory frameworks for virtual assets vary from country to country, and discussions on the path forward are still in the early stages.”

Meanwhile, the event will continue until Tuesday, bringing together major Korean and international financial institutions including the Bank for International Settlements, the Bank of Korea, and the Monetary Authority of Singapore who will share global market trends related to digital finance and explore the use of AI in the financial sector.

By Yoo Jun-ho and Lee Eun-joo

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