Discussions over the Korea special financial information law are expected to continue for some time

[Special Contribution] International regulators are willing to bring cryptocurrency inside the system, even though the market for such assets is still considered uncharted territory. The Financial Action Task Force (FATF) is an international organization that sets global standards for fighting illicit financial transactions, such as purchasing drugs, support for terrorism, corruption and money laundering to avoid taxes. Amid a global consensus to come up with a pan-national regulation to fight money laundering, governments around the globe are preparing their own guidelines to prevent cryptocurrency from being used in such illegal transactions. Further details will be announced after the FATF issues new guidance in July on the anti-money-laundering (AML) and counter-terrorism-financing (CTF) risks inherent to stable coins. (further reference: #The core of the discussion Korea’s Special Financial Information law follows the regulations and guidelines on anti-money laundering issued by the FATF. The main points regarding the revision are, 1) defining what is considered a crypto-asset and who the business owner is 2) requiring local exchanges to obtain a license. According to the revision, a crypto asset is “anything with economic value that can be exchanged or transmitted electronically, and is defined as an electronic token.” This excludes electronic tokens, game items, electrically registered stocks, electronic bank papers, electronic bills of lading, that do not have any exchange value. Those who are considered “business owners of crypto-assets” are defined as: those who buy or sell such assets; exchange with another crypto-assets, or transfer, store or manage them; act as an intermediary of transactions and exchanges of such assets with other crypto-assets, or do any other actions that are acknowledged by the presidential decree. However, it can be difficult to define the exact boundaries of a crypto-asset and who is considered a business owner for crypto-assets. For example, the two definitions can overlap between cryptocurrency nodes, or wallets, for such assets, and payment services for such assets. According to the revision, a business owner of crypto-assets must: 1) Have a verified account where the user can deposit and withdraw assets 2) Must secure an Information Security Management System 3) The representative (CEO) must meet certain legal qualifications (i.e. no criminal records) and must update their status every five years to the Financial Intelligence Unit However, considering that this can cause inconvenience (for the business representatives) opening real name accounts from banks, and the travel rule (financial regulators are obliged to collect data for both the remitter and the receiver when making cryptocurrency transactions.), the third regulation will likely change into a de facto approval system. For the regulation to work it needs to: 1) Be in line with international standards 2) Legislators must look into many examples from other countries 3) Legislators must listen to as many opinions from the public Only with this in mind will the regulation fulfill its purpose of preventing money-laundering both inside and outside of Korea, protect the fairness and the owners of crypto-asset related businesses rights and the utility of crypto-asset consumers, as well as protect both the consumers and businesses engaged in this market by facilitating a fair market environment for such assets. #It ain’t over till it’s over The discussion over the special financial information law can be summed up with a famous quote from american baseball legend Yogi Berra, “it ain’t over till it’s over.” From a different perspective, the ongoing revision may signal the start of a new era for digital assets, where crypto-assets are acknowledged inside the system and open doors for more blockchain based businesses. Right now might be the time for us to think of the beginning than the end. A seminar about the revision to the Special Financial Information Law is scheduled for July 10, from 2 pm to 6 pm. Interested individuals can attend the event through this link - Kyobo Securities economist Lim Dongmin

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