Financial Services Commission, South Korea’s financial regulator, through its Financial Intelligence Unit (FIU) has listed more stringent guidelines to be adopted in the country’s latest legislation on cryptocurrency.
This latest addition aims to enhance anti-money laundering (AML) oversight, specifically for the crypto industry. Cryptocurrencies have been viewed as gateways for illicit money transactions, given the anonymity the technology offers. Therefore, transactions using coins best known for privacy like Monero (XMR) and Zcash (ZEC) will be regarded as illegal from March 2021, when the legislation takes effect. Through the FIU, the regulator aims to eliminate all anonymous transactions within South Korea.
Not so new…
Despite these upcoming stringent laws, major South Korean exchanges will not experience significant transformations as the 2018 ban on anonymous crypto trading saw most exchanges delist privacy coins. Also, the backlash from users due to the use of these privacy coins in conducting illegal activities caused the exchanges to fall out of favor with MNR hence delisting it earlier this year.
Know Your Customer
In these latest regulations, banks have an expanded role in enforcing AML measures. Upgrading from guidelines, the legislation now makes it compulsory for each user to use their real names while signing up on crypto wallets. What’s more? Banks are now required to assess AML risks on crypto users and exchanges, and this role has given banks an upper hand over the virtual asset operators. FIU also requires exchanges to store users’ funds on different accounts from the exchanges’ fiat holding accounts.
Given that all accounts on the virtual asset operators must have verified identity, banks will undertake the role of verification, ensuring that all AML requirements are checked before confirmation.
The Face of the New Market
Currently, the four virtual asset operators having real-name accounts are Corbit, Bithumb, Coinone, and Upbit. Other exchanges will have to comply soon or be axed out of the market. Despite the new regulations being stringent, could enhance trust and credibility appeal to potential cryptocurrency users.
As the South Korean crypto industry reshapes, countries looking to enable their economies for cryptocurrencies could find steps to follow in enhancing their financial regulations to support virtual asset transactions.