The regulations are said to be damaging to 100s of local crypto firms who have been unable to secure real-name accounts with financial institutions in Korea
With stringent crypto rules coming into effect from this week in South Korea, industry experts fear that the new period for the crypto industry will have damaging consequences for a good number of domestic cryptocurrency firms. The new regulations require all cryptocurrency businesses to comply with stricter crypto reporting and registration rules.
According to an article from the Korea Herald, stakeholders in the Korean crypto industry are concerned about the impact of the incoming rules, especially the Specific Financial Transactions Act. The Act requires all virtual asset operators and firms to comply with official registration requirements, including showing evidence that they are operating using real-name accounts at South Korean banks, a requirement that is likely to significantly hamper cryptocurrency’s anonymity principle.
While Korea’s regulators have argued that the new rules are intended to prevent financial crimes like money laundering, the impact will be borne by a vast majority of smaller-scale crypto firms who have thus far been unable to cement a partnership with local financial institutions, experts have revealed.
“Since the promulgation of the law a year ago until now, so many crypto exchanges have tried to abide by the new law by getting real-name accounts from the local banks, but it didn‘t work,” Koo Tae-eon, a lawyer specializing in tech firms said.
“Even those that are equipped with an information security management system and have CEOs with no criminal records were not able to forge a partnership with banks,” the expert added.
Further, the new law not only fails to differentiate between different types and sizes of crypto firms but also risks pushing small firms into a corner by creating a crypto regulation that only the four largest cryptocurrency exchanges are able to comply, Koo explained.
Another effect could be the effective creation of a monopolized crypto market in the country, as only four of the over 100 local exchanges have so far reportedly been able to secure the necessary bank accounts.
The chair of the Korea Society of Fintech Blockchain and a professor at Korea University, Kim Hyoung-joong, echoed the concerns raised by other experts and openly urged the Korean financial authorities to consider that fact that banks are hesitant to issue real-name accounts to many of these firms.
In addition to the incoming compliance requirements for crypto firms, South Korea is also looking towards implementing a new crypto tax rule by 2022.