It seems that cryptocurrency trading regulations have been something of an issue of late, especially in South Korea. The Financial Services Commission has revealed a new crypto regulatory framework which although rather rigid, is quite welcoming to the legitimate trading of cryptocurrencies in general.
The new money laundering prevention guidelines are specifically targeted at crypto-exchanges. Some, like Bithumb, has been in the news of late regarding massive hacks and the regulations provide a framework that pertains to anti-money laundering (AML) and know your customer (KYC) requirements for these exchanges.
The FSC tightened existing cryptocurrency trading regulations on transactions and user monitoring. It also requested the Korea Financial Intelligence Unit (KFIU) which is the national financial watchdog to oversee cryptocurrency transactions and user activity. Additionally, as part of its larger initiative of monitoring the local cryptocurrency exchange market, the FSC has also ordered the relevant authorities to investigate three large banks. These are Nonghyup, Hana Bank and Kookmin which have been providing banking services as well as virtual accounts to cryptocurrency exchanges.
Stricter due diligence exercises for crypto exchanges
Cryptocurrency exchanges will be required to conduct Customer Due Diligence as well as Enhanced Due Diligence exercises. They will also be required to perform sufficient background checks to ensure that foreigners are not using local cryptocurrency exchanges to buy and sell digital assets. Additionally, the exchanges will have to ensure that criminals are not using personal accounts of individuals to launder money as well as to prevent suspicious transactions and payment processing.
The second policy imposed by the government is to prevent the re-emergence of the infamous “Kimchi Premium” by spotting suspicious fund movements in and out of cryptocurrency exchanges and banking accounts connected to crypto exchanges. If banks have a reason to believe that a user or an organization are transferring large sums of capital for the sole purpose of taking advantage of the “Kimchi Premium” in South Korea, authorities can investigate the user or the organization.
The new policies along with the request from the government to improve the AML and KYC systems of local cryptocurrency exchanges have demonstrated the willingness of the government of South Korea for cryptocurrency regulation, even at the risk of the public acknowledging the decision as an intent of legitimizing the local cryptocurrency sector.
