[Exclusive] 'Crypto-Rich' Borrowers Cannot Be Screened Out... New Leap Fund Has a Gap in Virtual-Asset Screening

[Financial News] The Lee Jae-myung administration's debt relief policy, the New Leap Fund, does not appear to examine whether borrowers hold virtual assets. This means borrowers may receive debt relief even if they possess large amounts of virtual assets and have the ability to repay their debts. Critics say the government is effectively doing nothing, despite the discovery of approximately 270 cases of concealed virtual assets under the similar debt relief policy known as the Saechulbal Fund.
According to data submitted by Korea Asset Management Corporation (KAMCO) to Kim Jae-seop, a People Power Party lawmaker on the National Policy Committee, on the 29th, KAMCO does not screen borrowers for virtual-asset holdings while verifying their assets. This leaves the issue unaddressed even though the amended Credit Information Use and Protection Act has taken effect, allowing government debt-adjustment agencies such as KAMCO to check virtual assets and other information without a debtor's consent.
This means there is no way to screen borrowers in advance, even if they possess enough assets to repay their debts when applying for debt relief through the New Leap Fund. The fund provides debt repayment support to individuals, including individual business owners, who have been delinquent for seven years or more and have unsecured debt with an aggregate principal amount of no more than 50 million won. Its policy objective is to "provide socially disadvantaged people with an opportunity to make a fresh start." However, allowing people to benefit from the policy while holding enough virtual assets to rebuild their lives would not serve that purpose.
Instead, KAMCO says it conducts follow-up management through a reporting system for improper receipt. If a report is filed with the Hidden Assets Reporting Center and concealed assets, such as virtual assets, are discovered, KAMCO can recover the amount written off or even seek damages. KAMCO explained that, so far, no cases have been confirmed in which additional assets, including virtual assets, were found among borrowers whose debts had already been extinguished.
However, cases have been uncovered under the Saechulbal Fund, which writes off the long-overdue debts of small business owners and self-employed people, in which borrowers concealed their virtual-asset holdings. A Board of Audit and Inspection audit in December last year found a case in which a borrower received relief on 120 million won in debt despite holding approximately 430 million won in virtual assets. According to the announcement at the time, 269 of the 17,533 people who received debt reductions of at least 30 million won held virtual assets worth 10 million won or more, with the largest holding amounting to 570 million won. The total amount of debt relief received by these individuals was 22.5 billion won. The Financial Services Commission said at the time that it was "in discussions on ways to work with virtual-asset service providers to verify whether applicants hold virtual assets," but the possibility of the same problem recurring under the New Leap Fund remains significant.
Kim Jae-seop criticized the policy, saying, "If the government cannot even verify whether borrowers hold virtual assets while implementing a large-scale debt-adjustment policy worth more than 2 trillion won, it is difficult to say that it is properly assessing their repayment capacity." He added, "If there is no mechanism to screen out in advance people who hold or conceal assets in the form of virtual assets that could be used to repay their debts, it will inevitably raise fairness concerns with citizens who have diligently repaid their debts."
The FSC explained, "The amended Credit Information Use and Protection Act took effect on the 13th of last month, and we are using it to collect information, including virtual-asset information, and assess repayment capacity." It added that the relevant ministry conducts income and asset screenings as well as regular verification checks for people subject to debt write-offs.
[email protected] Lee Hae-ram Reporter