Announcing CryptoSlate Research — gain an analytical edge with in-depth crypto insight. Learn more.
·

South Korea Makes Advances in Cryptocurrency Regulation

South Korea Makes Advances in Cryptocurrency Regulation

On June 8, the South Korean Policy Advisory Council met to develop a regulatory framework for national cryptocurrency exchanges. Following the recent Coinrail Exchange hack, the South Korean government is imposing more stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) policies to better protect investors.

Cryptocurrency Exchanges Recognized As Financial Institutions

With the intention to develop new policies for traditional financial institutions, the Korean Financial Intelligence Unit (KFIU) added cryptocurrency exchanges to the discussion in an effort to find new ways of regulating the nascent markets.

Bitcoin Dives Below $7,000 Support Level Following Korean Exchange Hack
Related: Bitcoin Dives Below $7,000 Support Level Following Korean Exchange Hack

After the $33 million hack of Korean cryptocurrency exchange, Coinrail, the South Korean government is taking steps towards implementing new KYC and AML policies for financial institutions.

Currently, the Korean Free Trade Commission does not have authority to access or monitor cryptocurrency exchanges and their customers.

In fact, cryptocurrency exchanges in South Korea only need to obtain a $40 communication vendor license to legally run and operate.

In a leap forward for cryptocurrency legitimization, the KFIU recognized cryptocurrency exchanges as large-scale financial institutions – subject to the equivalent scrutiny as that of commercial banks and stock markets.

Describing the implications of the emerging regulation, a KFIU spokesperson told CCN:

“Under current regulations, there are clear limitations in preventing money laundering on crypto exchanges because the only way authorities can spot suspicious transactions is through banks. If the bill of lawmaker Jae Yoon-kyung from the Democratic Party of Korea passes, local authorities will be able to impose identical regulations on crypto exchanges that are implemented on commercial banks.”

Korean Government Previously Reluctant to Legitimize Cryptocurrency

In an article released last year, Korean media outlet Hankyoreh revealed that Korean authorities encouraged policymakers to develop more stringent laws on regulating cryptocurrency early on.

At the time, it became evident that the Korean government was deliberately refraining from establishing regulation in order to postpone legitimizing markets.

In an interview with Hankyoreh, National Assembly Committee member Park Yong-jin stated:

“We are frustrated as well. We fully understand that the government is reluctant towards regulating the cryptocurrency market because it will inevitably lead investors to consider it as the government’s way of legitimizing the market. But, if the government leaves the cryptocurrency market unregulated, it is simply leaving it vulnerable to various issues.”

Long-Term Implications

With the cryptocurrency and blockchain industries quickly coming into the global mainstream, the need for regulation becomes more relevant and pressing as an anchor for transparency in the space.

South Korea Moves to Allow Domestic ICOs
Related Story: South Korea Moves to Allow Domestic ICOs

Institutional investment firms, such as Goldman Sachs and the Intercontinental Exchange, are gradually adopting cryptocurrency as a new asset class.

The entrance of institutional firms and regulatory development will set the stage for the worldwide adoption of cryptocurrency.

With new regulations coming into place, Korea is one of the first countries to take steps towards bringing cryptocurrency markets out of the shadows and into the public light.

Cover Photo by Saveliy Bobov on Unsplash

Filed Under: , Adoption, Regulation
Jonathan Kim

Jonathan Kim is a University of Washington student of Finance and cryptocurrency investor with a deep interest in the emerging industry of blockchain applications and cryptocurrency trading. His past experiences involve publishing original daily content for blockchain startups and trading cryptocurrencies using technical analysis principles.

View author profile

Disclaimer: Our writers' opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.