Financial regulators in South Korea have announced proposals that will directly regulate cryptocurrency exchanges, bringing firms under the remit of the regulator for the first time, BusinessKorea reported.
The Financial Services Commission (FSC) currently indirectly regulates exchanges by issuing administrative guidance to the banking sector, under its Financial Intelligence Unit.
The new proposals announced Wednesday clarifies the regulatory position for exchanges, and will see a raft of new measures introduced to regulate the industry. As part of the proposals, a new crypto licensing scheme is set to be introduced in Korea, as recommended by the Financial Action Task Force (FATF), in a bid to improve the transparency of crypto transactions, as well as imposing common standards on crypto exchanges.
Senior officials have said the move is required to prevent money laundering through the cryptocurrency markets.
Head of administration and planning at the FIU, Lee Tae-hoon, was quoted by the news outlet saying the new structures of regulation would reflect FAFT’s international standard for crypto exchanges: “If an amendment to the Act on Reporting and Use of Certain Financial Transaction Information, which reflects the FATF’s international standards for cryptocurrencies, passes the National Assembly, it will be possible to prevent money laundering through cryptocurrencies.”
He described the move as a switch from the current, indirect model of regulating exchanges via commercial banks, to a direct model where exchanges are directly accountable to the licensing regime and the regulator.
“If the amendment is approved by lawmakers, we can raise the effectiveness of regulations by shifting from the current indirect regulation through commercial banks to direct regulation,” Lee said.
This is expected to include stricter requirements for ID for account issuance at crypto exchanges, which would bring them in line with the “real name” requirements imposed on mainstream financial services companies.
It is also anticipated that tougher anti-money laundering processes will be introduced, which the regulator hopes will reduce instances of people using cryptocurrencies like SegWitCoin (BTC) to launder illegitimate funds.
The new regulatory approach will bring Korea into line with other regulators around the world, which have already taken more control over their domestic cryptocurrency sectors.
One of the largest markets for cryptocurrency in the world, the steps being taken by regulators in South Korea are likely to have a knock-on effect regionally and internationally, with more jurisdictions expected to be planning their own equivalent measures.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.