On 27 November 2019, South Korea passed an amendment to establish a legal framework for virtual currencies by categorizing them as digital assets. As reported by local news outlet Korea JoongAng Daily, the bill was passed by the National Assembly’s national policy committee, stating that, thanks to the bill, “cryptocurrency is one step closer to being legitimate in Korea”.
According to the bill, all the crypto exchanges and firms within South Korea will be required to report to and register with the South Korean monetary authority, Financial Services Commission’s Financial Intelligence Unit (FIU) to make the system more transparent and to legitimize investments. Additionally, the new bill strictly condemns the practice of money laundering by the companies.
The bill also mentions setting up a protocol for financial transactions that the companies will be expected to adhere to. These ground rules should be in compliance with the standards of the Financial Action Task Force (FATF). Apart from this, all companies will have to acquire an Information Security Management System (ISMS) certificate from the state-operated Korea Internet and Security Agency (KISA). The report also states, “…those operating false-identity bank accounts will not be approved”.
The bill is yet to be approved by the judiciary committee. Once approved, the law is expected to come into effect in 2020.
As reported back in May 2019, the South Korean government decided to do away with the guidelines for Anti Money Laundering (AML) within virtual currency, and introduced legislation to directly regulate cryptocurrency exchanges. The amendment required cryptocurrency exchanges to provide their full analysis of AML data to banks in order to maintain their accounts.
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