Cryptocurrency executives in South Korea that fail to register their exchanges with the country’s regulator could soon be facing time behind bars, as lawmakers look to increase the pressure on unlicensed operators, CoinDesk Korea reported.
South Korea’s National Assembly Amendment Subcommittee on Parliamentary Affairs agreed to an amendment to legislation currently making its way to the statute books. If passed, the law will require cryptocurrency exchanges to register with the Financial Services Commission before they can operate lawfully in South Korea.
Failure to comply with the rules could land companies with a fine of up to KRW50 million–equivalent to $42,460—as well as a prison sentence of up to five years for exchange directors.
The amendment was designed to bring South Korean law into line with international anti-money laundering rules set out by the Financial Action Task Force (FATF).
As part of the measures, exchanges will be required to maintain real name virtual bank accounts on behalf of each of their clients, in order to ensure more effective separation of client funds. Exchanges that do not operate real name virtual bank accounts would be forced to close under the legislation, with opposition politicians highlighting this objection to the amendment.
The issue is especially acute in South Korea, where a law that outlawed anonymous accounts in 2018 led to the closure of all but four of the country’s leading cryptocurrency exchanges.
The law is part of a wider strategic approach to cryptocurrency legislation in South Korea, with the end goal of a more defined legal framework governing the sector.
According to local media reports, the Financial Services Commission (FSC) could ultimately assume the role of cryptocurrency governance, with exchanges and other operators regulated in the same way as mainstream financial services.
The act is expected to be passed by lawmakers, and to become law in the coming months, although commentators do not rule out the possibility of further amendments to the Special Financial Transactions Information Act.
For crypto exchanges that hope to survive the implementation of this new law, there is at least a clear outline of what it takes to comply.
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