Crypto Regulation in Korea: Exchanges Get Green Light from the Government
The amendment to the “Act on Reporting and Using Specified Financial Transaction Information,” a.k.a. The Financial Transactions Reporting Act (FTRA) which introduces a new cryptocurrency exchange reporting system, passed the National Assembly’s Judicial Committee on the 4th of March.
As reported by Coindeskkorea, Parliament’s legislative process is completed since it passed the plenary session on 5th of March.
Obligation to register with the Financial Services Commission’s Financial Intelligence Unit (FIU).
The bill past the first step on November 25 when the National Policy Committee of the National Assembly approved the revision for the ‘Financial Transaction Information Act’.
In our previous post we have explained that the law was originally designed to prevent money laundering and terrorist financing. When banks and other financial firms identify illegal transactions, they are required to report them to the Financial Intelligence Unit of the Financial Services Commission. The exchange must always know who the customer is and monitor the transaction to prevent money laundering or to prevent the financing of terrorism.
The industry immediately received a welcome stance. Sophie Kim, CEO of Hanbitco and Chairwoman of the Korea Blockchain Association’s Exchange Committee, said,
“A foundation has been created to wash away the stigma of cryptocurrency exchanges, fraud, and debauchery and establish itself as a transparent and reliable industry. It will lead the development of the industry with the inflow of new capital.”
The heads of cryptocurrency exchanges who fail to register could face up to five years in prison or up to KRW 50 million in fines. According to the bill, the amendment shall take effect one year after the date of promulgation. Existing virtual asset operators, which are already in operation, can report immediately after the law is enforced, and must report within 6 months after the enforcement.
In order to comply with the regulations, exchanges have to meet certain criteria. First, virtual accounts with real names should be linked to commercial banks so that trades can be made in real names. Second, exchanges should be certified with ISMS (Information Security Management System) in terms of appropriate security capabilities. According to industry sources, around 350 to 400 exchanges are currently operating in South Korea. However, there are only six exchanges including Hanbitco, Gopax, Bithumb, Upbit, Korbit, and Coinone that have the ISMS certification.
The amendment to the bill follows the recommendations of the Financial Action Task Force (FATF), which has 37 member countries, including Korea, the United States, and the U.K. At the request by G20, the FATF issued a commentary in June 2019 on anti-money laundering of virtual assets.
*Edit: the post edited on March 5 to include the final vote in the House plenary session.
