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South Korea Reveals New Positive Guidelines
Editorial Team

According to an exclusive report of ccn.com, Financial Services Commission (FSC), the basic financial agency of South Korea, has just revealed a new crypto regulatory framework and guidelines to anti-money laundering (AML) and Know Your Customer (KYC) requirements for crypto exchanges.

According to the report, the new money laundering prevention guideline aimed at crypto exchanges, the FSC tightened the existing regulations on a transaction and user monitoring. In fact, the FSC asked for the Korea Financial Intelligence Unit (KFIU), the national financial watchdog, to meticulously oversee cryptocurrency transactions and user activity.

The FSC has ordered authorities to investigate into three major banks Nonghyup, Hana Bank, and Kookmin which provide banking services and virtual accounts to crypto exchanges.

Additionally, as the report wrote, crypto exchanges will be required to conduct Customer Due Diligence (CDD) and Enhanced (EDD), and perform sufficient background checks to ensure:

  1. Foreigners are not using local cryptocurrency exchanges to buy and sell digital assets
  2. Criminals are not using personal accounts of individuals secretly to launder money
  3. Prevent suspicious transactions and payment processing

The FSC ordered exchanges to conduct extensive CDD on new users to avoid the possibility of a criminal organization borrows a personal account of an individual to buy vast amounts of funds on local crypto exchanges and then withdraw them to a different account.

The second policy aims to prevent the re-emerge of the “Kimchi Premium” by finding suspicious fund movements in and out of cryptocurrency exchanges and crypto-connected banking accounts. In case banks have a serious reason to believe that a user or an organization is transferring huge amounts of money to take advantage of the “Kimchi Premium” in the country, the authorities will be able to investigate into the user or the organization.

However, these new policies to improve the AML and KYC systems of local cryptocurrency exchanges demonstrate the willingness of the government to regulate the crypto market even at the risk of the public acknowledging the decision as an intent of legitimizing the local cryptocurrency sector.

Usually, the Financial Services Commission and the Financial Supervisory Service have admitted the government reluctance to regulate the crypto market due to the fear that local investors would translate it as their way to legitimize the market.

Nevertheless, the consecutive hacking attacks and security breaches urged the South Korean government to get closer to the regulation of the market and revealed its plans to regulate crypto exchange as banks to protect investors and their assets.

These new guidelines could be considered as the first step the authorities have taken towards properly regulating the crypto market of the country for the first time ever.

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