Korea's P2P plans must be binding

Author: Brian Yap | Published: 1 Sep 2016

Korea’s regulator has taken its first steps to shield the country’s burgeoning peer-to-peer (P2P) loan industry from fraud, but its approach has been criticised for its leniency.

The country's Financial Reform Committee has set up a task-force team to draft industry guidelines aimed at protecting investors from fraud by P2P lenders, following several high-profile cases in China and the US.

But counsel in Korea argue that setting up guidelines may not be enough to address the concern surrounding a potential outbreak of fraud cases in the country’s nascent sector.

"The guidelines will not...resolve the fundamental issues of the current laws and regulations, as they will not have the legislatively binding effect of a law," Ik Hwan Cho, senior foreign attorney at Kim & Chang in Seoul.

He added that, while the guidelines could serve as a temporary measure, addressing the uncertainties surrounding the industry will ultimately...