The Challenger's Last Safeguard and the FSC's Dilemma [Crypto Insight]

On Jan. 28, 1986, the Space Shuttle Challenger broke apart 73 seconds after liftoff. On board was Christa McAuliffe, who was to become America's first "teacher in space," and schools and citizens across the country had been waiting to watch her lesson broadcast live from orbit. The launch — already delayed multiple times — had become a symbol of NASA's public credibility and its vision for the future. Yet the night before, engineers at solid-rocket manufacturer Morton Thiokol recommended postponing the launch, warning that the rubber O-rings could fail to function properly in the extreme cold. Organizational pressure and scheduling demands overrode the technical warning, and the launch was approved.

NASA's judgment was not without reason. The O-rings had shown problems before, yet no accident had followed, and NASA had gradually come to treat the risk as acceptable. Investigating the disaster, physicist Richard Feynman put it plainly: "For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled."

The lesson of Challenger is not that nothing should be done until every uncertainty has been eliminated. It is that no matter how important the mission or how great the public expectation, when the experts closest to the risk are still holding on to the last safeguard, their warning deserves serious consideration. The judgment that a risk is minor typically rests on the fact that no accident has yet occurred. As that judgment accumulates, the safeguards are quietly dismantled.

The Challenger lesson carries real weight in the current debate over fitness requirements for major shareholders of virtual asset service providers. Until early this year, the Financial Services Commission had been tightening those requirements. Recently, however, the Regulatory Rationalization Committee recommended amending the enforcement decree of the Act on Reporting and Using Specified Financial Transaction Information to exclude minor legal violations as grounds for disqualifying major shareholders.

The parent law, however, contains no such exception and no delegation authorizing the enforcement decree to create one. Deregulation through an enforcement decree without a statutory basis conflicts with the rule of law. The Supreme Court has consistently held that an enforcement decree cannot go beyond the scope of its parent law's delegation to establish new rules, and the Constitutional Court has emphasized the principles of statutory reservation and parliamentary reservation — that matters essential to the rights and obligations of citizens must be determined by the National Assembly through legislation.

The timing also raises questions about whether there is any genuine urgency that cannot wait for legislation. The most recent application for registration as a virtual asset service provider under the Act on Reporting and Using Specified Financial Transaction Information was processed in June 2024. There is no emergency that would justify relaxing the rules by enforcement decree without a statutory basis. Meanwhile, a company that announced plans to acquire a major domestic virtual asset exchange was convicted last year on charges of abusing a dominant market position under the Fair Trade Act and is currently appealing that ruling. If the enforcement decree amendment goes through, that company could complete the acquisition regardless of the criminal conviction. Notably, an executive of the virtual asset exchange in question sits on the Regulatory Rationalization Committee — though that executive did recuse from the vote. Even so, if the decree is amended under these circumstances, it is likely to be seen as a regulatory concession tailored to a specific company, regardless of whether tightening or loosening the rules is the more rational course.

The lesson of Challenger is not to delay decisions indefinitely. It is to reconfirm what the last safeguard actually is, precisely when the pressure to move fast grows loudest. Just as technology must put reality before public relations to work properly, financial regulation must put law before speed to succeed. The safeguard the Financial Services Commission is holding on to right now is not regulation itself — it is the rule of law. The cost of a wrong decision often falls on the markets and users who had no part in making it.