South Korea is set to place more stringent requirements on cryptocurrency exchanges regarding money laundering.
South Korea to Amend Existing Crypto Law
Lawmakers in South Korea voted on Thursday, March 5, to place new strict requirements on crypto exchanges operating in the country. This would help add legitimacy to the crypto space in South Korea and benefit the industry at large in the long run.
The lawmakers approved changes to Korea’s existing Financial Information Act, which would boost the country’s anti-money-laundering (AML) and counter-terrorism financing (CFT) framework for virtual asset service providers (VASPs).
The Act demands that all VASPs in the country need to register with regulatory agencies and partner with a single bank for providing deposit and withdrawal services to their customers. By linking the cryptocurrency wallets and user’s real-world bank accounts, regulators would find it easier to track the movement of illicit funds.
Furthermore, VASPs are required to get system certification from the Korean Internet Security Agency. However, this is a costly and lengthy process, with just six companies successfully cleared so far.
According to CoinDesk Korea, the new regulation could eliminate the smaller players in Korea who cannot afford the regulatory burden. To tackle this, exchanges might look to merge or raise funds to meet the new requirements.
However, the new regulation would also force out shady projects looking to defraud investors of their funds, especially initial coin offerings (ICO), which are now required to abide by the registration requirements.
Cryptocurrencies Regulated and Accepted in Korea
The new regulations covering cryptocurrency exchanges in Korea could mean that digital currencies are officially regulated and also accepted in the country. Doo Wan Nam, who works with MakerDAO, tweeted that if the new regulations passes in Korea, cryptos and blockchain companies will then officially be regulated and accepted in Korea. In addition, this will mean good news for blockchain professionals in Kore and bad news for any ICOs and exchanges looking to scam others.
South Korea has been one of the progressive cryptocurrency countries in the world. The cryptocurrency world has enjoyed a massive boost in the country over the past few years, with some of the largest crypto exchanges, like Upbit and Bithumb, all originating from South Korea. With this latest regulation, South Korea is looking to consolidate its position as one of the leading cryptocurrency countries.
The legislation is another example of a country working to abide by the new global AML and CFT (Countering Financing of Terrorism Act) directives in the cryptocurrency space. Regulators around the world have enhanced their efforts to curb potential illicit activity in their jurisdiction since the Financial Action Task Force (FATF) provided guidelines for regulating VASPs.
South Korea’s president will now be given 15 days to sign the amendment into law. The changes in the Act will come into effect a year after it is approved, and the full law will be effective six months after that.
As the popularity of cryptocurrencies and their adoption grow, more countries around the world are looking to regulate the industry rather than issue an outright ban. It could be possible that we would see more regulations for the sector from various countries over the next few months.