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Seeking exceptions to the Special Finance Act

“The real-name verification virtual account service is designed in a way that banks can autonomously evaluate risk. It is hard to come up with additional regulations at the moment. However, I think it would be helpful if businesses and financiers refer to existing regulations. I will look over the opinions submitted during the session,” said Jeon Yo-seob, an official from the Korea Financial Intelligence Unit (KFIU) at a public hearing on Dec. 1 held to revise enforcement of Special Finance Act. #Exceptions will be made At the public hearing, Jeon said the finance ministry is planning to come up with a number of exceptions when enforcing the Special Finance Act. “The gist of the revised Special Finance Act is the range of virtual assets, who will be seen as the operator of virtual assets, the standard in issuing an account and the process of reporting on virtual asset businesses,” Jeon said. One of the exceptions will be those who simply provide peer-to-peer platforms or wallet service platforms. They will not be acknowledged as virtual asset operators according to the Special Finance Act. Also, there will be exceptions to which type of virtual assets will be accepted. For example, prepaid cards, mobile gift cards and electronic bonds will not be acknowledged as virtual asset. Some types of virtual coin which cannot be traced because of its transactions history, dubbed dark coins, will also not be accepted. #More concrete guidelines needed Jeon held a Q&A session after the hearing. He said that according to the current Special Finance Act, there are some gray areas where regulations on foreign corporations and foreign executives are vague. Jeon said that such vagueness will be amended soon. An official from Dunamu, a Korean blockchain company, asked about the vague guideline in issuing real-name verification virtual account systems. For example, the regulation bans affiliations among virtual asset operators due to a risk of money laundering, but the official asked what exactly is "affiliation." If all types of "affiliation" should be banned, some of the trades will move to overseas exchanges, the official said. Jeon from KFIU said that the Special Finance Act doesn't completely ban all types of affiliations. Jeon added that affiliations that lead to cross trades will be banned. An official from Standard Chartered also said that it would be better if there are some concrete guideline so that banks can more easily review issuing the virtual accounts. Jeon answered that since each bank have autonomous system to evaluate the risks when issuing the virtual account, it is not easy at the moment to set up additional guidelines to regulate them. When asked about the vague regulation over foreign operators, Jeon said that even if he or she is a foreigner, if their clients are Koreans, they are covered by domestic regulations. If they don’t report their business to the authorities, it would be illegal.

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