Hong Seong-ki, head of the virtual currency response team at South Korea’s Financial Services Commission (FSC), has called for lawmakers to quickly pass the first cryptocurrency bill in the country over security and money-laundering fears.

Investor protection

Hong makes acknowledgements that South Korea is lacking the frameworks to store and manage the burgeoning billions of dollars in cryptocurrencies due to its insufficient security measures.

On 25 July, Seong-ki said in an interview with Bloomberg, “While crypto markets have seen rapid growth, such trading platforms don’t seem to be well-enough prepared in terms of security… We’re trying to legislate the most urgent and important things first, aiming for money-laundering prevention and investor protection. The bill should be passed as soon as possible.”

Lawmakers in South Korea are being urged to pass the bill due to the accelerating growth of the cryptocurrency markets. A newly-drafted regulation framework seeks to legitimize domestic cryptocurrency and blockchain-related business practices for the first time in the country.

In the interview, Seong-ki made emphasis on the fact that the bill is not aimed at emerging cryptocurrency exchanges or trading generally speaking, but instead is there to protect users and investors through the implementation of vigorous internal management systems to prevent the large-scale and frequent hacks that are rife in South Korea.

Security issues

Significant hacking scandals in June 2018 forced regulators to speed up attempts to regulate cryptocurrency exchanges, putting a bill into motion that gives focus to money laundering. Should the bill pass, virtual currency exchanges will be required to report to the Financial Intelligence Unit (FIU) and be supervised regularly by the entity.

In late June, Bithumb suffered a USD 31 million hack; although, South Korea’s largest exchange did apply diligent measures to increase security against “high-risk” countries. Shortly after, the exchange managed to recover USD 14 million of the stolen crypto, with thanks to a collaborative effort between itself and other exchanges.

Rallying around blockchain

In May 2018, the South Korean government began setting in motion revisions to “unify” with the G20’s recommendations on cryptocurrency regulations.

From 13 July to 26 July, South Korean lawmakers from various political parties have been making draft bill submissions to create clearer regulations on initial coin offerings (ICOs), cryptocurrencies and blockchain technology.

Furthermore, it is expected that also on 26 July, further details regarding the “new-growth technology” tax credit scheme are said to be arriving.

With the Fourth Industrial Revolution around the corner, the Korean FSC announced a new governing body called the Financial Innovation Bureau, designed to protect consumers against risks that will present themselves in an age of financial technology innovations.

 

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