Privacy laws may hinder new KYC verification laws in South Korea

Getting your Trinity Audio player ready...

With just months left before South Korea’s new Know-Your-Customer (KYC) regulations come into effect, legal minds in the country have yet to figure out what it will mean for the country’s privacy protection laws. The new KYC laws will affect financial service providers, including digital currency exchanges and will require the use of social security numbers, which contravenes privacy laws.

For the digital currency community, the new KYC laws date back to January 2018 when the government banned anonymous digital currency trading. Since then, the government has continually stepped up its KYC requirements for financial services companies. These new requirements come into effect in March next year. However, their implication on privacy laws has been the subject of heated debate among South Korean legal experts, local outlet Digital Today reports.

The new law will require virtual asset services providers such as digital currency exchanges and Bitcoin wallets to verify the details of their users against their personal data. This data will include their social security numbers.

However, in South Korea, a law known as the Personal Information Protection Act prohibits local firms from legally requesting their customers for their social security numbers. The law does, however, lay out special circumstances under which a financial institution may request for these numbers, such as when the customer is making a major transaction.

Citing a local financial analysis institute, the outlet claimed that collecting social security numbers is the most effective means of preventing money laundering by the exchanges. However, due to the privacy protection law, there’s still a long way to go before the South Korean government can find an amicable solution that stamps out crime while still protecting privacy.

South Korean exchanges haven’t had the best year in 2020. Bithumb is now up for sale, as CoinGeek reported. The exchange was one of the earliest in the world and has shot up to be the largest exchange in the world periodically. However, after a series of legal and management disputes, local outlets report that the exchange is up for sale for $430 million.

Coinbit, another Korean exchange, was raided by the Seoul police last month over market manipulation claims.