The Financial Intelligence Unit (FIU) in South Korea is considering to regulate the digital asset exchanges operating in the country directly.
The agency operating under the Financial Services Commission (FSC) currently indirectly imposes rules on the wild sector through administrative guidance to banks.
According to Business Korea, an FIU official revealed that the authorities are planning to increase the transparency of digital asset transactions by introducing “cryptocurrency exchange licensing system” which was recommended by Financial Action Task Force (FATF).
“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,” Lee Tae-hoon, head of administration and planning at the FIU, said.
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“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,” he added.
Need clarity on existing regulations
The local cryptocurrency companies, however, want clarification on the existing rules of the regulatory crypto framework, including on the issuance of real-name accounts to crypto exchanges by banks.
South Korea is one of the biggest markets for crypto trading, only falling behind to Japan and the United States. According to official estimates, the average South Korean crypto investor spent $6,000 in 2018 to buy digital currencies.
However, crypto-related crimes are also rampant in the country. Government data shows that South Korean nationals lost $2.28 billion in the last two years to scams and frauds. However, the figure did not include tens of millions of dollars involved in crypto exchange hacks.
Meanwhile, the peninsular nation recently declared its city of Busen, the second-largest city in the country, a “regulation-free” zone to boost blockchain-based companies.