February 1, 2023

South Korea Introduces Mandatory Registration of Cryptocurrency Exchanges

Subcommittee on Legislative Amendments of the National Assembly for Parliamentary Affairs of the South Korea passed an amendment to the Special Financial Transactions Act.

This amendment to the bill, which is stillis under development, will force cryptocurrency exchanges to register with the Financial Services Commission (FSC) of South Korea. Leaders of organizations that refuse to do so will face up to five years in prison or a fine of $ 42,460.

In accordance with the amendment aimed atIn order to bring the industry in line with the FATF international anti-money laundering guidelines, exchanges must also have so-called virtual bank accounts, verified by identification data.

Opposition lawmakers have expressedconcern that exchanges without virtual accounts with verified identities will be forced to close, which will lead to a further reduction in the domestic cryptocurrency industry.

Recall that in 2018, the banks of South Koreabegan to take measures to limit the service of cryptocurrency traders who did not verify their identity. As a result, only four exchanges remained in South Korea that were able to meet the requirements of banks and the government: Bithumb, Upbit, Corbit and Coinone.

If the amendment becomes part of the law, itIt will make it easier for exchanges to claim the opening of verified virtual bank accounts. Lee Jun-haeng, CEO of Gopax, which has no verified bank accounts yet, said the changes could lead to a healthy market if the system is fair.

In addition, the bill proposes to reduceobligations for certification of information security management system. The committee agreed to provide a grace period for re-applying for certification if the exchange failed the initial certification.

The law on special financial transactions ultimately aims to make exchanges fully regulated institutions, along with banks.

“This is expected to be the first step in developing consumer protection and a stable market,” said Korea Blockchain Association Secretary General Jae-Jin Kim.

A law, including a new amendment, is likely to be passed by the National Assembly. However, the amendment may be amended after consideration by other government bodies.