On March 5, the National Assembly of South Korea approved a revised law on the reporting and use of special information on financial transactions, aimed at introducing a licensing system for exchange of cryptocurrency.
Accordingly, virtual asset companies such as cryptocurrency exchanges should report their activities to the Financial Intelligence Unit (FIU) under the Financial Services Commission after obtaining “real name-confirmed accounts” from commercial banks. Failure to report operations can result in a maximum of five years in prison or 50 million won ($ 42,000) in fines.
The bill, to be implemented in March next year, requires existing crypto exchanges to meet the requirements for a real-name account and ISMS authentication, and report their activities within six months of the implementation of the law.
The Financial Supervision Service and FIU will also strengthen the Anti-Money Laundering (AML) system for virtual assets such as cryptocurrency in accordance with the recommendations of the Financial Action Task Force prior to the implementation of the law.
The revised bill will speed up the preparation of sub-legislation, including the scope of virtual asset companies that are subject to AML requirements, and conditions and procedures for issuing real name accounts.
So far, only four major cryptocurrency exchanges – Upbit, Coinwon, Bithumb and Korbit – have used real accounts. Most others have reportedly relied on honeycomb accounts, receiving investor money with their own company accounts to support customer transactions.
As the conditions and procedures for banks to issue real-name crypto-exchange accounts become stricter, small stock exchanges using honeycomb accounts will be forced to comply with or leave the industry.
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