The South Korean Parliament has officially recognized the legitimacy of cryptocurrency in the country. This decision was madeafter two years of developing guidelines for cryptocurrencies.
The National Assembly of South Korea adoptedan amendment to the Law on the Reporting and Use of Special Financial Information, which legalized cryptocurrency trading, and, as local media reported, the proposal to amend the bill received unilateral support: 182 votes for and zero against.
The law will enter into force 12 months from the date ofsigning, while it provides for an additional 6-month grace period for cryptocurrency exchanges during which they will be able to verify compliance with the new regulatory paradigm. Thus, by September 2021, all crypto exchanges and wallet providers in South Korea will have to comply with the amended laws.
Under this amendment, cryptocurrency exchanges and otherscryptocurrency companies must meet the same reporting requirements as other financial institutions. The amendments legalizing cryptocurrency in South Korea contain provisions similar to the guidelines already established by the Financial Action Task Force (FATF).
The decision of South Korea coincided with the news thatThe Supreme Court of India annulled the ban of the country's central bank on the banking services of crypto companies. As in the case of India, several cryptocurrency exchanges in South Korea ceased operations, citing unfavorable rules.
In August 2019, there were reports thatthat 97% of South Korean crypto exchanges were at risk of going bankrupt, and blockchain startups dissatisfied with the regulatory climate in the country were placing their tokens on foreign exchanges.
Legalization of cryptocurrencies will require compliance with the “Know Your Customer” (KYC) procedure with name verification with the participation of commercial banks.
In addition, the mandatory ISMS certificate fromThe Korea Internet Security Agency (KISA) will be quite expensive for small and medium-sized crypto companies. Even major players such as Bithumb highlight the high costs that companies will be forced to incur to comply with the requirements set by the Financial Services Commission (FSC).
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