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South Korea is now tightening its regulations on the crypto industry. Financial Services Commission (FSC) Chairman Eun Sung-soo said that foreign exchanges that deal in Korean won must also comply with the country’s anti-money laundering requirements.
The FSC Chairman made the remarks in response to a question posed by a lawmaker on Binance need to comply with a revised law, according to the Korea Herald. The world's largest cryptocurrency exchange has recently been facing actions from various regulatory agencies in other countries.
“If a cryptocurrency exchange serves local customers with the won-currency settlement, it must register with the (Korea) Financial Intelligence Unit,” Eun said. The FIU is a unit under the Financial Services Commission in charge of anti-money laundering compliance.
The revised law requires banks to issue real-name accounts for crypto traders and also assess crypto exchanges’ in terms of business risk and its potential to be used for criminal activity. It took effect last March but has a six-month grace period.
According to the report, minor crypto exchanges have been suspected of using opaque accounts to lure investors, allowing them to manage their investors’ funds using their own bank accounts. Starting September 25, exchanges will no longer be allowed to make withdrawals for crypto trading unless they comply with the real-name bank account requirement. There are around 100 minor crypto platforms in the country.
South Korean banks were initially reluctant to partner with crypto exchanges and open real-name accounts for traders. They fear that they will be held accountable for fraud, money laundering, and other illicit activities related to crypto transactions.
However, the FSC is reportedly mulling on the possibility of issuing guidelines that will lessen banks’ accountability should such activities occur. An unnamed official said that these guidelines will likely include “no-action letters” issued by government officials formally stating that they will not recommend legal action against financial institutions in such cases.
