Crypto Exchanges In South Korea To Be Regulated Like Banks

News, Regulation | June 15, 2018 By:

The South Korean government is planning to regulate local crypto exchanges like banks to ensure criminals do not utilize cryptocurrencies to finance illicit operations.

During an Anti-Money Laundering Policy Advisory Committee meeting, the Korea Financial Intelligence Unit (FIU) said they will oversee crypto exchanges and will impose the same regulations that are currently in place for banks. It will follow the movement of leading economies such as the US to prevent money laundering and terrorism financing with more rigorous verification processes for large transactions and monitoring of users.

“We plan to include virtual currency exchanges under a direct supervision of the AML/CFT (Anti-Money Laundering/ Countering Terrorism Financing) system,” the FIU said. “If a virtual currency exchange does not comply with these obligations, the FIU or the entrusted FSS [Financial Supervisory Service] will be able to inspect the monitoring system of the virtual currency exchange.”

Currently, the FIU and the FSC have no jurisdiction over crypto exchanges, since cryptocurrencies are not considered financial assets. The regulators have to monitor money-laundering activities of crypto exchanges through banks. The FIU said it will coordinate with the Congress to pass a bill that would allow local financial authorities to monitor traditional bank accounts and cryptocurrency users extensively with transparency.

“Under current regulations, there are clear limitations in preventing money laundering on crypto exchanges because the only way authorities can spot suspicious transactions is through banks,” a KFIU spokesperson said. “If the bill of lawmaker Jae Yoon-kyung from the Democratic Party of Korea passes, local authorities will be able to impose identical regulations on crypto exchanges that are implemented on commercial banks.”

The news came after South Korean crypto exchange Coinrail admitted having been hacked. According to reports, the hacker may have stolen 1,927 ether, 2.6 billion NPXS, 93 million ATX and 831 million DENT coins, as well as significant amounts of six other tokens. These assets in total were worth around $40 million at the time of the hack.