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How New Crypto Regulations in South Korea Are Affecting Firms

Crypto regulations in South Korea - Image from pixabay by sergeitkomav

A cryptocurrency broker is a firm that can stand as a mediator between cryptocurrency markets to facilitate the trading of these currencies. Some of the best crypto firms include coin base, binance, Kraken, etc. New crypto regulations in south Korea have really limited the operations of internal and external firms.

Blocking Crypto Exchanges That Lack Permit.

South Korea plans to lock out domestic access to foreign cryptocurrencies that lack established registration standards. The locking is done to operate in the country, causing investigations into the company. 

Sixteen foreign crypto Firms have been reported by the intelligence unit of the Financial Service Commission (FSC). The firms have been reported to the Nation's Investigative body and called to cause blockage to the firm's local website.

Some of the Companies listed include MEXC, Pemex, and XT. Com, B. T. C. C, and BTCEX. Officials have plans to report violations to the countries where the companies come from and intend to separate them from other local sectors. However, the reporting occurs only if they fail to get the necessary permits.

Crypto Regulations in South Korea: Penalty. 

South Korea mandated that crypto Firms should receive a certificate of Information Security Management. This mandate led to over half of the nation's crypto exchanges ending their operations. In addition, people operating unregistered, illegal businesses are at risk of imprisonment for longer than five years or a penalty of up to 50 million. 

Crypto regulations in South Korea - Image from pixabay by sergeitkomav
Crypto regulations in South Korea - Image from pixabay by sergeitkomav

First Arrests. 

South Korea made its first arrest in a proof of about 3.4 billion dollars worth of free exchange transactions to illegal activities. Many were held on allegations such as operating a crypto firm without registration and setting up paper companies. 

South Korea Money laundering. 

Some firms being accused of conducting illegal business activities include Poloniex and KuCoin. These accusations have been caused by improper registration, and could face fines and imprisonment. South Korea's anti-money laundering authority focuses on going after 16 foreign crypto firms. 

The focus is because they have been operating in the country without proper regulatory approval. This focus is after the (KOFIU) Korea Financial Intelligence Unit announcement on the 18th of August. The unit (KOFIU) urged Virtual asset users to practice extra caution to avoid any damages from transactions of unregistered VASPs.

Actions Taken On Unregistered Virtual Asset Users.

The Korean Financial Intelligence Unit has notified the Investigative authority about the violation of registered duties in the firm. 

The Korean Financial Intelligence Unit has requested the Korean Communications Commissions and the Communication Standards Commissions to block domestic access to unregistered websites of VASPs. This blockage reduced the use of Virtual asset services provided by unregistered entities.

Credit card companies will inspect and block credit card-based virtual asset purchase and payment services offered by foreign firms. This inspection is done to disable using IDPs in the domestic market.

The transfer of Virtual assets to and from the 16 unregistered entities will be impossible as the authorities issued administrative guidance that needed suspension of transactions between the unregistered and registered entities.

The Haste To Meet New Rules

50 South Korean crypto Firms have applied for certification under the country's Information Security Management System (ISMS). This system is the first step in meeting new crypto exchange rules that will start taking effect at the end of September 2021. In addition, this certificate is the first Financial Services Commission that domestic crypto exchanges must meet to continue operating. This is according to the law of Crypto Exchange.

The ISMS is a system by which the Korea Internet and Security Agency accepts that a business should meet certain set standards of Information protection. The system protects through different means such as risk management, access control, system, and service security management, and prevention of and the replies of incidents not foreseen. This certificate makes the Virtual Asset safer for crypto firms, ensuring transparency in their transaction.

More than 20 Korean crypto Firms have acquired the (ISMS) certification, and thirty others have tried applying and are still awaiting certification. Among the 30, eight applications are being revised and processed. According to (KISA), the Korea Internet and Security Agency. 

Once a crypto firm has acquired the ISMS certification, contracts need to be obtained. The contracts need to be obtained, especially with local banks, to attain the right names for bank accounts during withdrawal and deposits of Korean won on their trading platforms. They are obtaining contracts and getting the right names to help to reduce the risk of financial crimes, thus putting away money laundering, price manipulation, and anonymity. It is also easier to get caught by a crypto firm operating illegally.

The government hasn't managed to quantify the number of exchanges in the country. The inability to quantify exchanges in the country has made it difficult to ascertain how many crypto Firms had to stop bringing in operations due to the new crypto regulations in South Korea. Many firms, Coinfinit, Trebit, and Bitkiny, are suspected of having been suspended due to the new rules.

Cryptocurrencies are considered illegal in South Korea as a strict regulatory framework governs them. Crypto taxing is thus regarded as penumbra because the transactions accepted are neither assets nor cash and thus tax-free. 

The New Crypto Exchange Regulations. 

The South Korean laws are rigorous, including government registration, among other procedures. The government has restricted the use of anonymous accounts in crypto firms. Local financial institutions are forbidden from hosting Bitcoin future transactions and reporting suspicious bands. The Financial Supervisory Service of South Korea has also tightened the bank requirements for crypto Firms. 

Crypto regulations in South Korea - Image from pixabay by sergeitkomav
Crypto regulations in South Korea - Image from pixabay by sergeitkomav

A trader should also create a real bank name account with the same bank as the crypto firm. By creating a real bank name account, both the bank and the dealer get to verify the trader's identity. 

All South Korean exchanges and Crypto Firms are required to obtain a license to operate from the Financial Services Commission. Therefore, obtaining a license would help to counterterrorist financing obligations to all South Korean exchanges. 

Every company must have a certificate from the Korean Internet and Security Agency to provide information on security management.

Firms should now provide the Financial Intelligence Unit with the firm's data, the company's name, the business's location, contacts, and bank information. 

Who is Mostly Affected by the New Crypto Regulations in South Korea?

The Virtual Asset Service Providers(VASP) were most affected since they engage in these activities, administering and keeping Virtual, selling and purchasing the currencies, and transmitting cryptocurrencies.

Other affected firms are the Initial Coin Offering projects, the Custodian wallet providers, and the Crypto exchanges. 

The New Korean legislation made AML /CTF requirements compulsory for various Virtual Asset Service Providers. When the requirements are compulsory, financial regulators gain access to data regarding crypto transactions. 


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