Perpetual Futures Regulation: Reviewing Referral Activities for Overseas Exchanges
- 1. Perpetual Futures Compared with Futures in Korea’s Regulated Financial System
- 2. Risk of a 0.66% Price Movement at 150x Leverage
- 3. Domestic Business Issues to Review in Referral-Code and Referral Operations
- 4. Overseas Businesses and Review of Korean Regulation
- 5. Limitations on Domestic Protection in Incidents and Disputes
- 6. Initial Review Steps for Platform and Referral Operators
- ① Comparison of Public Promotional Materials with Actual Activities
- ② Commission Arrangements and User Recruitment Channels
- ③ Required Changes Distinguished from Dispute Response
- 7. Frequently Asked Questions (FAQ)
- Q1. Is everyone who uses overseas perpetual futures subject to punishment?
- Q2. Is merely sharing a referral code immediately unlawful?
- Q3. Can an exchange licensed overseas also conduct business targeting Korea?
- Q4. Is legal consultation unavailable if I suffer losses from perpetual futures?
- Q5. What materials are needed for business advisory services?
- Perpetual Futures Business: Product Structure and Recruitment of Users in Korea
Based on the Financial Services Commission’s October 16 warning on perpetual futures, this article summarizes high-leverage risks, limitations on investor protection, and legal review points for referral-code and commission-based activities targeting residents of Korea.
1. Perpetual Futures Compared with Futures in Korea’s Regulated Financial System
The financial authorities explained that perpetual futures currently traded on offshore platforms, unlike conventional futures, have no maturity date, do not presuppose delivery of money or other assets at a specified future time, and are traded 24 hours a day, seven days a week.
The name ‘futures’ alone should not be taken to imply the same structure or protection as financial investment products in Korea’s securities market. The actual contractual terms, trading and settlement methods, and margin and liquidation rules must be checked.
| Review Item | Matters Highlighted in the Announcement |
|---|---|
| Product structure | Differences from traditional derivatives, including maturity, delivery assumptions, and trading hours |
| Leverage | A high-risk structure linked to underlying asset price movements at 10 to 200 times leverage |
| User protection | Difficulty applying protections identical or similar to those for transactions within Korea’s regulated financial system |
| Business activities | Soliciting trades, encouraging sign-ups, receiving commissions, and similar activities targeting residents of Korea |
2. Risk of a 0.66% Price Movement at 150x Leverage
The press release gave an example of a structure linked to a Korean stock index at 150 times leverage, in which an intraday movement of only approximately 0.66% against the position could trigger forced liquidation of the entire investment.
This is an illustration of risk provided by the authorities. It should not be treated as a formula determining the liquidation price of every product. Actual conditions must be checked against the margin method, maintenance margin, fees, and platform rules.
With high leverage, losses can increase before there is time to provide additional margin. The financial authorities also noted that, because of these speculative characteristics, such products are not currently permitted within Korea’s regulatory framework.
[Financial Services Commission Press Release: Excessive Leverage and Forced Liquidation Risks]
3. Domestic Business Issues to Review in Referral-Code and Referral Operations
The financial authorities stated that, if unlawful domestic business activities by offshore platforms are identified, they would respond by measures including filing complaints with investigative authorities. A footnote gave examples of business activities soliciting trades from residents of Korea, such as encouraging new sign-ups through referral codes or receiving commissions.
The mere existence of a referral code does not justify a uniform conclusion that punishment will follow. Conversely, describing an arrangement as simple advertising in a contract does not, by itself, determine the legal nature of the actual activities.
| Review Area | Facts to Examine Together | Materials to Prepare |
|---|---|---|
| Domestic targeting | Who was targeted, and in what languages and through which channels users were recruited | Posts, channel operation records, and target-customer policies |
| Involvement in transactions | Whether assistance with sign-ups, deposits, or orders went beyond introducing information | Guidance messages, consultation records, and operating manuals |
| Revenue structure | What determines remuneration, such as sign-ups, trading volume, or losses | Affiliate agreements, settlement statements, and payment records |
| Risk disclosures | Whether statements guarantee returns or principal, or downplay liquidation risks | Original advertisements, videos, explanatory materials, and revision histories |
| Relationship with the platform | How outsourced, agency, and referral tasks and authority are allocated | Platform identity, contracting parties, and documents allocating responsibilities |
This table is a practical framework for organizing a legal review, not a statutory checklist in the press release. More important than the type of channel, such as YouTube, Telegram, or online communities, is examining actual recruitment methods and the connection between involvement in transactions and remuneration.
4. Overseas Businesses and Review of Korean Regulation
Article 6(2) of the Act on Reporting and Using Specified Financial Transaction Information provides that the Act applies to financial transactions and similar activities of virtual asset service providers even where conduct occurs abroad, if its effects extend to Korea. The first questions are whether the actual service constitutes a virtual asset business under the law and whether it has effects in Korea.
Article 11 of the Financial Investment Services and Capital Markets Act prohibits engaging without authorization in financial investment business that requires authorization. A specific review is needed of the rights, obligations, and settlement structure of the perpetual futures concerned, and whether the activities of offering or intermediating them are regulated by the relevant laws.
The same law does not automatically apply to all perpetual futures, nor does every affiliate bear the same responsibility as the platform operator. The press release itself also does not constitute a finding of illegality or a decision to impose punishment on any particular individual or business.
The financial authorities stated that they had requested cooperation from major offshore platforms to prevent violations of Korean law, and would carefully review whether to introduce similar products domestically and how to regulate them, taking account of market effects, investor protection, and global discussions. Plans for future review must be distinguished from the legality of current business activities.
5. Limitations on Domestic Protection in Incidents and Disputes
The press release explains that it is difficult to apply resolution and relief procedures under Korean law in cases involving offshore platform bankruptcy or business suspension, unilateral trading suspensions, IT or financial incidents, and disputes. It also warns that Korean supervisory authorities have difficulty verifying the protection and custody of assets deposited by customers.
Accordingly, users must not be told that they will receive the same protection as within Korea’s regulated financial system if an incident occurs. It is also necessary to avoid explaining that Korean investor protection is secured merely because a platform is registered with an overseas supervisor or has users in Korea.
Whether claims concerning separate wrongful conduct, such as breach of contract or false representations, and resulting losses can be reviewed in an individual case is a different question. Matters to check include identifying the counterparty, terms and conditions, governing law, jurisdiction, evidence, and assets against which enforcement is possible. Trading losses alone do not guarantee compensation or recovery.
6. Initial Review Steps for Platform and Referral Operators
① Comparison of Public Promotional Materials with Actual Activities
Review posts, videos, chat guidance, and affiliate agreements together. Identify any statements that downplay risks or guarantee returns, and determine whether the operator’s actual activities match its contractual role.
② Commission Arrangements and User Recruitment Channels
Check inflows by sign-up code, the conditions for remuneration, settlement counterparties, and whether users in Korea are targeted. Rather than relying only on accounting labels, examine which activities the payments compensate.
③ Required Changes Distinguished from Dispute Response
After reviewing the legal nature of current business activities, assess whether recruitment methods, guidance, and contracts need to be changed. If user complaints or inquiries from authorities have been received, preserve original materials and revision histories, and organize the facts and points of contact for responses.
Materials already questioned must not be deleted or retrospectively created with contents different from those at the relevant time. The review items above are recommendations and do not mean that all businesses are subject to identical statutory duties or response deadlines.
7. Frequently Asked Questions (FAQ)
Q1. Is everyone who uses overseas perpetual futures subject to punishment?
This announcement alone does not justify concluding that all individual users will be punished.
The press release focuses on warnings about using high-risk products and responding to unlawful domestic business activities. Use of a service must be distinguished from recruitment, intermediation, and operation, and the law applicable to each actual activity must be reviewed.
Q2. Is merely sharing a referral code immediately unlawful?
Rather than reaching a conclusion from a code alone, the actual role and revenue structure must be examined.
Relevant considerations include repeated inducement to sign up or trade, domestic targeting, contracts with the platform, involvement in transactions, and commission terms.
Q3. Can an exchange licensed overseas also conduct business targeting Korea?
Overseas licensing or authorization does not automatically establish the legality of domestic business activities.
Separately from the scope of overseas licensing or authorization, it is necessary to check applicable Korean laws, the products and activities offered, and the business structure targeting residents of Korea.
Q4. Is legal consultation unavailable if I suffer losses from perpetual futures?
The warning that protection equivalent to Korea’s regulated financial system is difficult to expect must be distinguished from reviewing individual claims.
The circumstances of the loss, agreements and actual transaction processing, any false representations, the counterparty, jurisdiction, and the feasibility of enforcement must be examined. Consultation or filing a report alone does not guarantee recovery of losses.
Q5. What materials are needed for business advisory services?
It is helpful to prepare product descriptions and terms, affiliate agreements, original promotional materials, and commission settlement records.
Please also organize the platform’s location and contracting parties, recruitment channels and target customers, the scope of assistance with sign-ups, deposits, and orders, and any complaints or inquiries from authorities received. Do not submit confidential information such as private keys or recovery phrases.
Perpetual Futures Business: Product Structure and Recruitment of Users in Korea
The financial authorities’ announcement goes beyond a simple warning about leverage and also addresses offshore platforms’ business activities targeting residents of Korea.
If you operate a platform or affiliate marketing business, an integrated review of product structure, actual activities, domestic targeting, and revenue structure is needed. It is advisable to determine the scope of advice based on contracts and actual operational materials rather than isolated promotional statements.
Decent Law Firm reviews the products, contracts, promotional materials, and domestic user recruitment structures of overseas platforms and affiliate marketing businesses, and supports legal reviews relating to regulatory responses and disputes.
