South Korea Drawing Up Regulations for Cryptocurrency Exchanges

Amid the meteoric rise of Bitcoin, the South Korean Financial Services Commission (FSC) is finalizing the proposed regulatory draft for the cryptocurrency exchanges.

Unauthorised fundraising

As reported by The Hankyoreh daily newspaper, the FSC could consider the operations of the cryptocurrency exchanges in South Korea like Bithumb, Coinone, and Korbit, as unauthorized fundraising.

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At present in the country, all cryptocurrency exchanges come under the Act on Consumer Protection in Electronic Commerce Transactions. This allows them to operate as e-commerce websites and clients registering to the online platforms as vendors.

The FSC does not treat cryptocurrencies as financial instruments, but as unauthorized fundraising. Based on the worldwide trading demand of cryptocurrencies, the FSC is not considering a blanket ban on the exchanges but it is planning to allow the operation under certain rules.

Throwing some light into the matter, an official from the FSC said: “Cryptocurrency exchanges will be required to maintain standards for consumer protection, such as having separate deposits for customers’ assets, and for increasing transparency, such as having a procedure for confirming customers’ identity. The authorities will also be empowered to prosecute exchanges that break these rules.”

Bitcoin Regulations Act

Earlier in August, South Korean lawmaker Park Yong-jin introduced the ‘Bitcoin Regulations Act’ in which it defined the digital currency and also classified five digital currency handlers. The bill also specified requirements and prohibited many activities.

Mr. Park also stated: “Individuals who wish to engage in the virtual currency handling industry [operating an exchange] must receive a permit from the Financial Services Committee.”

The FSC is also concerned about the possibilities of money laundering using cryptocurrencies. On Tuesday, it announced its anti-money laundering policies in a meeting held at the National Federation of Banks. It announced four anti-money laundering policies which include measures for the prevention of money laundering using Bitcoin.

Kim Yong-beom, vice chairman of the FSC, stated: “We will improve the safety of financial transactions by establishing a discipline system corresponding to the risk of money laundering of new products.”

“We will draw up thorough countermeasures that prevent cryptocurrencies, like bitcoin, from being a new channel for money laundering,” he added.

Worries

On a side note, according to Vice News, North Korea’s Pyongyang University has started a cryptocurrency crash course to make the population aware of the booming market. But the news attracted the attention of Bitcoin mining experts, as many suspect that the country is training hackers in the technology.

South Korean prime minister Lee Nak-yon expressed concern about the new market at a cabinet meeting last week. He was concerned about young people using it for illegal activities. He said: “There are cases in which young Koreans including students are jumping in to make quick money and virtual currencies are used in illegal activities like drug dealing or multi-level marketing for frauds. If we let things continue, I feel some serious pathological phenomenons could occur.”