Korea’s Financial Services Commission “The Bank decides to issue the account, not the government”
The Financial Services Commission (FSC) announced on Tuesday that a bill that will establish a legal foundation for virtual currencies had been passed at the National Assembly’s national policy committee. The FSC expected that when fully taken into effect, the rule will help make cryptocurrencies more transparent by making the digital tokens abide by international standards. The regulator’s efforts to legitimize cryptocurrency dates back to Jan. 23 last year, when it came up with a guideline detailing the rules that financial companies should follow when processing cryptocurrency-based transactions. It revised the guideline in June, 2018. But a more serious discussion took place in the second half of 2018 after the Financial Action Task Force released guidance on crypto assets. Several lawmakers started proposing bills related to a regulatory framework for cryptocurrency afterwards, which led to the passage of the latest bill. The bill passed recently is based on a proposal drawn up by Rep. Kim Byung-wook in March. If the bill finds its way into the judiciary committee and the main floor of the National Assembly, cryptocurrency will finally fall under a regulatory framework. With the new regulation, the FSC will require cryptocurrency-related businesses to report to and register as digital asset businesses with the FSC’s Financial Intelligence Unit (FIU). The businesses ought to comply with the anti-money laundering requirements. If they go against the rule, the entities will be subject to five-year jail terms or fines less than 50 million won. The financial institutions making a deal with crytpcurrency businesses should confirm the status of the units as to whether the entities are properly registered and register deposits separately. The financiers should terminate the deal if those businesses are not reported to the FIU or deemed to have a high probability of money laundering. The rules on cryptocurrency will come into effect one year after the passage and existing crypto players should complete registration within six months of implementation. The head of the FIU will be in charge of overseeing the registration and the Financial Supervisory Service could help with supervision. The FSC said that it plans to actively consult with experts in the private sector in the process of introducing the new bill as the proposal will hold both cryptocurrency businesses and financial institutions accountable. Therefore, the details are subject to change while communicating with other parties. The cryptocurrency platforms and companies raised the need for more detailed directions since the bill doesn’t specify the registration process. “The rules for opening accounts for cryptocurrency trading won’t likely be revealed until the second quarter of next year,” one source said, “Even if the conditions are set, it is up to each bank in deciding whether they will offer accounts to certain entities.” This indicates that it remains to be seen whether the industry’s voice will be reflected on the bill.