The South Korean regulator, the Financial Services Commission (FSC) has recently stated that they intend to strike up a partnership with their counterparts in Japan and China to address the growing concern of speculative transactions. This goal has already been put in action as deputy finance ministers from all three countries held a meeting in December 2017 to brainstorm about possible solutions. The meeting was also attended by the FSC Chairman, Choi Jong-ku. The local media outlet Yonhap News Agency quoted the chairman when he stated that Seoul hopes to establish a meaningful relationship with its counterparts located in Tokyo and Beijing. In addition, the FSC has also revealed during a recent press conference that they intend to launch a bank inspection together with the Korean Financial Intelligence Unit. The FSC chairman added that they hope to curb the current crypto craze which is primarily driven by speculative investment.
Choi noted that cryptocurrencies are essentially void of utility when it comes to functioning as a realistic payment method. The regulator added that cryptocurrencies currently only trigger potentially harmful side effects such as market manipulation, fraud, heightened speculative trading, illegal practices of capital funds raising, and cybercrimes associated with cryptocurrency theft. The Korean Herald reported that the FSC currently has an ambiguous stance when it comes to potentially shutting down cryptocurrency-based businesses in an attempt to minimize the nefarious activities often associated with the industry. According to Jong-ku, the world is currently at a crossroads when it comes to cryptocurrency and the policies it wishes to embrace regarding the industry. The regulator noted that Korea’s history of “trial-and-error” policies could serve to establish a trilateral collaboration to ultimately implement efficient regulation.
The FSC is currently in the process of inspecting six major banks in the country including Shinan, Woori, and Kookmin. During the investigation, the FSC intends to target those accounts of individuals and businesses with ties to the cryptocurrency industry. In December 2017, the FSC demonstrated a somewhat aggressive approach to regulation when they ordered banks to cease issuing virtual accounts which users need to participate on crypto exchange platforms. The new system has diminished the sense of anonymity previously associated with cryptocurrency, and a new system which requires users to use their real-life identities is set to be implemented by the end of this month.
In addition, the FSC chairman released an official warning regarding cryptocurrencies when he noted that the industry is fraught with instances of money laundering due to their anonymity. Jong-ku specifically appealed to banking institutions in South Korea and noted that they are the gatekeepers when it comes to cryptocurrency activity monitoring. The regulator has previously expressed concern that South Korean banks did not also report on suspicious activity on user accounts. The current investigation has likely been launched to pick up on previous crypto transactions that may have been linked with illegal activity.
Jong-ku stated that the only path open to regulators within the current policies was to launch investigations. The regulator also noted that the FSC intends to subject the industry to stricter regulations soon. Also, the regulating agency wants to introduce severe sanctions for any crimes linked to cryptocurrency. Something which could prove damaging to the industry, especially considering that South Korea is home to some of the world’s largest crypto exchange platforms. However, the media outlet, KBS Radio, noted that the severe penalties would be introduced before the regulation policies are changed.
However, what precisely the severe sanctions may be is still unclear. So far, it seems that the only steps available to the FSC are to suspend any account discovered to be engaged in illegal activity. Jong-ku has declined to comment on the regulator’s plans for cryptocurrency taxation as well as penalties for tax evasion.
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