In response to the multiple hack attacks on Crypto exchanges, the South Korean Government has said that it will strengthen the sector regulatory framework. Under a new bill that has already been tabled in the country’s parliament, Crypto Exchanges will have more obligations in the future.
Why The New Bill Is Important
Recently, cases of Crypto Exchange hacks have been on the rise in South Korea. On June 10, Conrail was hacked and about $40 million stolen. The exchange is the seventh largest in the country. On June 19, Bithumb posted on its website and tweeted about the loss of Cryptocurrencies worth 35 billion won (~US$31 million) to hackers. However, the exchange quickly deleted the notice and tweet about the incident.
The Financial Services Commissions (FSC) chairman Choi Jong-Ku commented on the theft and said it is important to ensure the Cryptosystem is stable. He added that it is essential to strengthen the protection of Cryptocurrency traders to prevent the occurrence of such cases in the future. FSC is the top financial regulator in the country. He said the Act on Reporting and Using Specified Financial Transaction Information will be amended and the National Assembly is already discussing it.
Newspim reported that currently, the Korean regulators have little influence on what goes on with Crypto Exchanges. However, the financial authorities will now have more control through the ‘report system.’ This will limit the use of Cryptocurrencies for money laundering and enhance transaction and cooperation with commercial banks.
About The New Bill
The revised bill comes with more responsibilities for Crypto exchanges. Under the new bill, the government recognizes a virtual currency exchange as a business that handles virtual currencies. All Crypto-handling businesses will be in charge of preventing money laundering. The new bill requires a virtual currency business to be reporting to the Financial Intelligence Unit (FIU). Moreover, FIU will be supervising this business. In case of any illegal activity, the Financial Supervisory
Service (FSS) and FIU will be the ones to inspect and investigate the involved exchanges.
FIU’s Director of Planning and Cooperation Team Son Sung-eun has said that the government cannot sit and watch Cryptocurrencies becoming centers of money laundering. That is why the government is determined to ensure that this industry is well regulated. The new law will also require all the financial companies involved to maintain records such as customer confirmation and high cash proceedings reporting among others for five years.
Sanctions Under The New Bill
Any Crypto business that fails to comply with these new rules will face penalties and punishments. Some of these sanctions include dismissal of senior or involved officials, suspension of business operations, and issuing warnings among others. FIU manager Kim Ji-woong, for instance, said that any business that fails to go through customer verification as required, or fails to detect and report suspicious transactions to the relevant authority will be fined 30 million won (~$27,077).
The new bill is expected to help in addressing some of the challenges experienced by those operating in the Cryptocurrencies business. In addition, it will help in encouraging more people to embrace these businesses as they are now closely regulated. However, the vice director of Virtual Currency Countermeasures Hong Sung-ki has said that the new developments do not mean the Crypto exchanges have been legally accepted and integrated into the system.