Today marks an important day in South Korean crypto history. The policy committee of South Korea’s National Assembly has now passed a bill that promises effective oversight of the country’s crypto industry. Even though the law still needs to be validated by the Assembly’s central floor lawmakers, it marks a significant step for the country.
New Steps Forward
With this new bill, cryptocurrencies will be categorized as digital assets and the exchanges that operate in crypto will be recognized as regulated financial businesses. The possible implications of this new step in the country’s pro-crypto adoption history are significant and far-reaching.
The regulatory framework mandates Korea’s crypto exchanges to report to the Financial Services Commission (FSC), the South Korean financial regulating body. The bill mandates strict Know-Your-Customer (KYC) and Anti-Money Laundering (AML) regulations on the crypto exchanges. Added to the KYC/AML regulations, customer verification policies will be needed, as well.
Bulking Up Security
The exchanges will also be required to strengthen their platform security systems to ensure continued operation. Crypto exchanges already in operation will need to report to the Financial Intelligence Unit (FIU) of the FSC in order to verify their relative security levels. Should an exchange fail to be certified within the Information Security Management System (ISMS), the exchange will be denied approval for operation.
These certifications will be doled out via the Korea Internet and Security Agency (KISA). This will ensure that an exchange will strengthen its security measures in order to comply with the new regulations mandated by the government.
Greater Scrutinies
Historically speaking, South Korea has enjoyed the title of one of the most popular markets for trading and investing in various forms of crypto. A strange paradox to this fact is that the country’s authorities were reluctant to regulate this form of finance. Their reason? They thought regulating crypto would legitimize the industry, even if it’s letting a lot of money flow through the country.
This resulted in criticisms against Korea’s government for not taking appropriate measures in preventing hacking damages. Having had enough, the Financial Supervisory Service (FSS) stated that it would start probing accounting practices on Korea’s major crypto exchanges. The announcement was made shortly after Korea’s prosecutors began to zero in on corporate accounts on crypto venues. The regulators speculated that it could lead to money laundering operations.
South Korea’s crypto exchanges hold a collective $1.9 billion in cryptocurrencies spread across their various accounts. This came from the latest report from Korea’s central bank. Some of these exchanges are listed among the members being probed by the FSS.
Upbit, one of Korea’s major crypto exchanges, had its business raided by the Korean government investigators over suspected foul play. These investigations were proved false when the exchange passed independent audits. The company showed full solvency, with a cash ratio of 128% and a reserve ratio of 103%.