The South Korean government is preparing new regulations that will require crypto and stock influencers to disclose their asset holdings and any compensation they receive when promoting investment products.

According to a report by Herald Business, Democratic Party lawmaker Kim Seung-won is drafting revisions to the Capital Markets and Financial Investment Business Act as well as the Virtual Asset User Protection Act.

Under the proposed rules, individuals who repeatedly provide investment advice or receive compensation to encourage the public to buy or sell financial products and crypto assets will be required to publicly disclose the types and amounts of assets they own.

They must also state whether they receive payments or other forms of compensation and transparently explain any partnerships or paid promotional arrangements involved.

The regulation will apply to various forms of communication, including articles, social media posts, videos, live broadcasts, and other digital content. The technical details of its implementation will be further defined through a presidential decree.

Notably, violations of this rule may result in severe penalties, reportedly comparable to sanctions for market manipulation or insider trading, both of which are considered serious financial offenses.

Conflict of Interest Risks and Potential Investor Losses

Kim highlighted the growing phenomenon of “finfluencers,” referring to influencers who focus on finance and investment topics. According to him, many of them wield significant influence over the public but are not subject to adequate transparency obligations.

He stated that numerous influencers provide opinions or investment recommendations without clarifying whether they own the promoted assets or receive compensation from certain parties.

“They provide inaccurate information and create conflicts of interest. Yet their opinions have a substantial impact on the public and may cause unexpected losses for investors,” Kim said.

Data from South Korea’s Financial Supervisory Service show a sharp increase in reports involving unregistered investment advisory entities. The number of reported cases rose from 132 in 2018 to 1,724 in 2024.

This significant surge underscores the urgency of implementing regulations to enhance transparency and protect retail investors from misleading promotions.

Global Trend of Monitoring Investment Influencers

South Korea is not the only country tightening oversight of financial influencers. Several global regulators have also taken similar measures.

In the United Kingdom, the Financial Conduct Authority requires prior approval for financial product promotions. Meanwhile, in the United States, the Securities and Exchange Commission and the Financial Industry Regulatory Authority have imposed fines on influencers who failed to disclose paid promotions.

In Italy, the national market regulator has emphasized that European Union investment regulations fully apply to influencers promoting crypto assets and high-risk products.

In Indonesia, crypto asset promotions fall under the supervision of the Financial Services Authority, where influencers promoting crypto assets are required to comply with advertising and consumer protection rules, including prohibitions against making misleading profit claims.

However, specific obligations to disclose personal asset ownership or promotional compensation have not yet been explicitly regulated in the same manner as the framework currently being designed in South Korea.