The South Korean government finally appears to be ready to move to address criticism regarding its “inertia” over the formation of new crypto regulation. And to do so, it appears to have begun communicating directly with exchanges it believes stand a chance of meeting regulatory guidelines in time for a deadline in September this year.
Crypto trading platforms have until September 24 to officially register with the regulatory Financial Services Commission (FSC), establish anonymity-free banking for their clients on a contractual basis with domestic banks, put anti-money laundering protocols in place and gain information security management system (ISMS) certification if they wish to continue trading.
Those who fail to meet the deadline will be forced to close or face criminal prosecution under legislation that came into force in Spring this year.
Thus far, 20 exchanges – including the “big four” of Upbit, Bithumb, Korbit and Coinone – have obtained ISMS certification, although only the four market leaders have banking contracts in place. All of these expire before the September deadline, however.
And on June 3, the FSC summoned the heads of the group of 20 exchanges for an unprecedented face-to-face meeting at its offices. The details of the meeting appear to be relatively scant, with the FSC playing its cards close to its chest and exchanges seemingly reluctant to say anything that may compromise them.
Mira Kim, a South Korean blockchain consultant, told Cryptonews.com:
“I think the real significance of this meeting is not what happened, but that it happened at all. These 20 platforms have been singled out by the FSC, probably as it feels that they are the ones who are really making a fist of their attempts to meet all the guidelines and beat the deadline.”
In a report, Money Today quoted an unnamed industry source as stating that they had “heard” the meeting had not been “about deciding or tackling specific agendas,” but about “explaining the direction of the existing government policy” and enforcement protocols for “the second half of the year.”
A financial regulatory source, also unnamed, confirmed that the meeting’s details were “private,” but had provided “a way to explain the government’s stance in detail to cryptoasset business operators,” but that it was also “listening to” what the exchanges had to say for themselves.
The media outlet also claimed the following matters were discussed:
- Crypto tax and tax reporting protocols
- Market manipulation
- Crypto custody
- Possible guidelines for trading restrictions
- A system of cautions for platforms that fail to abide by regulations
- Criminal history checks on platforms and employees
And the government appears ready to enact another shake-up of its regulatory infrastructure. Members of the FSC met on June 4 with two other financial regulators, the Financial Intelligence Unit and the Financial Supervisory Service as part of a new regulatory drive that will see new policies formed to tackle what the government has called an “overheated” crypto sector.
Multiple instances of alleged crypto-related fraud and multi-level marketing have left thousands of investors out of pocket, with a controversial 20% crypto tax levy set to come into force on January 1, 2022.
Per News1, the regulators, as well as members of the Korea Exchange, the Korea Securities Depository and the state-owned IT finance company Koscom, have formed a new taskforce that a source close to the talks claimed had “discussed the direction of what countermeasures should be prepared in relation” to the crypto sector. The source added that the group was also communicating with industry representatives.
Meanwhile, in a separate development, residents of South Korea will be legally obliged to declare their crypto holdings on overseas platforms from June 2023, reported Asia Kyungjae.
Currently, the law requires that South Korean residents report funds held in deposits and savings accounts outside the country, as well as stocks, bonds, funds, derivatives and insurance products. But from June 30, 2033, crypto holdings on platforms outside the nation will be added to the list after a new clause was inserted into the Act on Reporting and Using Specified Financial Transaction Information.