The South Korean Financial Services Commission (FSC) had released a new regulatory framework and Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines for cryptocurrency exchanges in the country. The nation’s financial regulator decided now is the time to do so after numerous hacks and fraud cases in the industry. It is now making efforts to regulate the sector to serve and protect investor interests better.
Positive Changes in Regulations
The new guidelines are strict but show the regulator has a positive view towards cryptocurrencies. These regulations are targeted at crypto exchanges, many of whom have been hacked in recent months. The regulator has asked these entities to tighten their due diligence practices and ensure that all KYC and AML requirements are followed accurately. The FSC ordered the Korea Financial Intelligence Unit (KFIU) to keep a close eye on crypto transactions and activities in the country.
The regulator has also instructed authorities to investigate the activities of Hana Bank, Nonghyup, and Kookmin, the three major financial entities providing banking services to the cryptocurrency exchanges.
Exchanges, on the other hand, will be asked to follow Enhanced Due Diligence (EDD) and Customer Due Diligence (CDD). They are also mandated to:
“conduct Customer Due Diligence (CDD) and Enhanced (EDD), and perform sufficient background checks to ensure foreigners are not using local cryptocurrency exchanges to buy and sell digital assets, criminals are not using personal accounts of individuals secretly to launder money and prevent suspicious transactions and payment processing.”
The FSC also wants to prevent the “Kimchi Premium” from reemerging by monitoring suspicious fund movements in and out of crypto exchanges, as well as bank accounts related to these exchanges. If the banks suspect that large sums of capital are being used to take advantage of the Kimchi Premium, South Korean authorities can investigate the matter.
Does the Government Consider Cryptos Legitimate?
The public perception about the regulations could be shaped positively toward believing that it is the government’s means of legitimizing the crypto sector. The FSC and Financial Supervisory Service previously admitted their fears about designing such a public perception. However, due to security breaches and hacks on the exchanges, they had to step in and regulate the markets. They will focus on regulating crypto exchanges as banks to protect customer interests.
Several more guidelines are expected to be released over the course of the next few months to structure the market.
