South Korea adopts a new bill to pave the way for the regulation of cryptocurrency. The new bill classifies cryptocurrencies as digital assets and recognizes cryptographic exchanges as financial businesses.
27 November, 2019 | AtoZ Markets – After much deliberation in recent years, South Korea has recently taken the necessary steps to regulate cryptocurrency space. Today, the National Assembly’s National Policy Committee has passed a bill that will lead to adequate monitoring of cryptography. But it still needs the support of main floor legislators.
South Korea’s New Cryptocurrency Bill
The new bill officially classifies cryptocurrencies as digital assets and recognizes crypto exchanges as regulated financial businesses. This is an essential step in this country. And it will have far-reaching implications.
Specifically, this regulatory framework will require to report and register with the Financial Regulator of South Korea, the Financial Services Commission (FSC). It will also have to comply with strict rules on KYC, money laundering (AML), and customer verification policies.
As mentioned, exchanges will also need to strengthen their security systems to keep them running. Existing cryptocurrency trading platforms also need to report to the Financial Intelligence Unit (FIU) of the FSC. And those will not be certified under the Information Security Management System (ISMS). Also, it will not be approved. This certificate is issued by the Korea Internet and Security Agency (KISA). It is to strengthen security measures and comply with these new regulations imposed by the government.
However, the authorities hesitated to regulate the virtual asset class because they believed that the regulation of cryptocurrency could confer legitimacy on the sector. Cryptocurrency exchanges in South Korea are currently classified as information providers rather than financial institutions. They are, therefore, the responsibility of the Korean Ministry of Science rather than the Korean financial regulators.
Use of Corporate Accounts by Cryptocurrency Venues
The government was also criticized for not doing enough to prevent damage from hacking. But after that, the Financial Supervisory Service (FSS) said it would expand its survey of accounting practices to include the country’s big cryptocurrency exchanges. The announcement came after prosecutors opened an investigation into the use of corporate accounts by crypto venues. Regulators believe that can lead to money laundering.
According to the latest report from the country’s central bank, South Korean exchanges hold about $ 1.9 billion of cryptocurrencies in their accounts. That makes it easy to classify some of them among the large companies targeted by the latest FSS survey.
Last year, government investigators and local police raided the major crypto venue Upbit for alleged fraud. However, the exchange accomplished to pass independent audits, demonstrating total solvency. It was since the ratio of Upbit reserves stood at 103 percent and the cash ratio at 127 percent.
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