A South Korean financial watchdog plans to tighten its supervision of domestic cryptocurrency exchanges, according to a recent media report from the local press.
Business Korea reported yesterday that the Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) had disclosed a plan to directly regulate the digital currency exchange operating in the country. Currently, the watchdog exercise control over the sector indirectly, through administrative guidance to banks.
The publication quoted Lee Tae-hoon, head of administration and planning at the FIU, as saying that the government planned to introduce a “cryptocurrency exchange licensing system”, as recommended by the Financial Action Task Force (FATF).
“If an amendment to the Act on Reporting and Use of Certain Financial Transaction Information, which reflects the FATF’s international standards for cryptocurrencies, passes the National Assembly, it will be possible to prevent money laundering through cryptocurrencies,” Lee said at a hearing on transparency in virtual asset trading held at the National Assembly.
“If the amendment is approved by lawmakers, we can raise the effectiveness of regulations by shifting from the current indirect regulation through commercial banks to direct regulation,” Lee said, as quoted by Business Korea.
Under the current rules, crypto exchanges operating in South Korea are required to have a real-name account system, which allows users to make crypto transactions only if they have accounts under their real names at the same banks where cryptocurrency exchanges open their accounts. This requirement was introduced in January, 2018, as part of the government’s efforts to curb crypto-related money laundering and speculation.
According to recent media reports, some minor crypto trading platforms have been offering opaque accounts, also referred to as “beehive accounts”, which allow them to manage traders’ money with their corporate bank accounts. By using such accounts investors are able to circumvent the real name account requirement.
Last month, South Korea’s government estimated that cryptocurrency-related crimes had caused financial damage of more than $2 billion over the past two years.
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