The financial agency of South Korea, Financial Services Commission (FSC), has announced new crypto regulatory framework and guidelines pertaining to anti-money laundering (AML) and Know Your Customer (KYC) requirements for crypto exchanges.
Positive Changes are appreciated
In its new guidelines related to money laundering prevention, the FSC tightened existing regulations on transaction and user supervision. The FSC requested the Korea Financial Intelligence Unit (KFIU), the national financial watchdog, to strictly oversee cryptocurrency transactions and user activity.
As a part of its larger initiative of keeping an eye over the local cryptocurrency exchange market, the FSC has ordered authorities to investigate into three major banks Nonghyup, Hana Bank, and Kookmin that have been providing banking services and virtual accounts to crypto exchanges.
Furthermore, cryptocurrency exchanges will be asked to conduct Customer Due Diligence (CDD) and Enhanced (EDD), and perform sufficient background checks to ensure:
- Local cryptocurrency exchanges are not being used by the foreigners to buy and sell digital assets
- Personal accounts of individuals are not being used secretly by the criminals to launder money
- Prevent suspicious transactions and payment processing
FSC ordered exchanges to conduct extensive CDD on new users to prevent criminal organizations from borrowing a personal account of an individual to purchase massive amounts of funds on local cryptocurrency exchanges and then withdraw them to a different account
Another policy imposed by the government is preventing the re-emergence of the “Kimchi Premium” by tracking doubtfull fund transfers in and out of cryptocurrency exchanges. If banks have a reason to believe that a user is transferring large sums of capital for the sole purpose of taking advantage of the “Kimchi Premium” then authorities can investigate into the user.
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 to regulate the cryptocurrency market even at the risk of the public acknowledging the decision as an intent of legitimizing the local cryptocurrency sector.
Cryptocurrency Sector is Now a Genuine Industry
The Financial Services Commission and Financial Supervisory Service have admitted on several occasions that the government has been reluctant towards regulating the cryptocurrency market because it feared local investors would take it as the government’s way of legitimizing the crypto market.
But, after several hacking incidents and security breaches, the government of South Korea realized it is time to regulate the market and revealed its plans so that banks can protect their investors and assets.
For the first time in history, the South Korean government is considered to have taken step towards properly regulating the cryptocurrency market by releasing the new money laundering prevention guideline targeted at crypto exchanges
In the upcoming months, local authorities will cooperate with both banks and local exchanges to better structure the market.
Disclaimer: This is not an investment advice. It is of paramount importance that everyone should do his or her own due diligence before investing in any product, platform, tokens etc. Cryptocentral.io does not endorse any content or product published on this page. Our aim is to simply provide all the readers with the latest information in the field of cryptocurrency / blockchain industry that might be of interest to our readers.