South Korea Outlines Proposed Legislation for Cryptocurrency Exchanges

The South Korean Financial Services Commission is finalizing its proposals to regulate cryptocurrency exchanges. This follows an earlier “Bitcoin Regulation Act” submitted by lawmaker Park Yong-jin. Meanwhile, the prime minister is very concerned about the growth and risks of cryptocurrencies including bitcoin and has called for immediate action.

Also read: South Korea’s Largest Underground Mall Adds Bitcoin Payments to 620 Stores

Requirements for Crypto Exchanges

The South Korean Financial Services Commission (FSC) is finalizing proposed regulations for cryptocurrency exchanges. According to The Hankyoreh daily newspaper on Tuesday, the proposed regulations “would treat the operation of cryptocurrency exchanges (such as Bithumb, Coinone, and Korbit) as unauthorized fundraising.”

Currently, cryptocurrency exchanges fall under the Act on Consumer Protection in Electronic Commerce Transactions. That means “they can be operated as an e-commerce website by anyone who registers as an online vendor,” the news outlet detailed. “While the FSC regards cryptocurrencies not as a financial instrument but as unauthorized fundraising, it recognizes that they are already being traded around the world,” the publication noted, adding that the Commission plans to allow the exchanges to operate under certain terms. An FSC official detailed:

Cryptocurrency exchanges will be required to maintain standards for consumer protection, such as having separate deposits for customers’ assets, and for increasing transparency, such as having a procedure for confirming customers’ identity. The authorities will also be empowered to prosecute exchanges that break these rules.

In August, Democratic Party lawmaker Park Yong-jin submitted a proposed revision to the Electronic Financial Transactions Act. He proposed that anyone entering into a digital currency business, including operating a cryptocurrency exchange, must obtain a permit from the FSC, the publication detailed.

Measures Against Money Laundering

FSC vice chairman Kim Yong-beom.

The FSC also held a meeting at the National Federation of Banks on Tuesday to announce its anti-money laundering policies. The event was attended by more than 200 officials including representatives of law enforcement agencies and the Korean Customs Service, Nspna reported.

Four anti-money laundering policies were announced, including measures for the prevention of money laundering using bitcoin. “We will improve the safety of financial transactions by establishing a discipline system corresponding to the risk of money laundering of new products,” FSC vice chairman Kim Yong-beom was quoted saying. He then clarified, as reported by Yonhap News:

We will draw up thorough countermeasures that prevent cryptocurrencies, like bitcoin, from being a new channel for money laundering.

Prime Minister Worried

Prime Minister Lee Nak-yeon.

Also on Tuesday, at a cabinet meeting held at the Seoul Government Complex, Prime Minister Lee Nak-yeon expressed concerns regarding cryptocurrencies, Yonhap News also reported.

He pointed out the issue of drug trafficking and multi-level fraud involving cryptocurrencies. “It’s time to look into the problem,” he emphasized, stating that:

The virtual currency is speculative, and bitcoin has exceeded 11 million won, trading volume surpasses the Kosdaq. I feel like there is serious distortion or pathology if I leave it as it is.

“Fundamentally, there are issues to be considered about bitcoin and virtual currency,” Lee further stressed. Citing how the FSC is already in talks with various ministries regarding this topic, he emphasized, “it is necessary to carry out a thorough analysis” of cryptocurrency and initial coin offering (ICO) issues.

South Korean Cabinet meeting on Tuesday.

What do you think of South Korea’s proposed regulations for cryptocurrency operations? Let us know in the comments section below.

Images courtesy of Korean Ministry of Culture, Sports and Tourism, Chosun, and Yonhap News.

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