The Financial Intelligence Unit (FIU) of South Korea’s Financial Services Commission has revealed plans to bring cryptocurrency exchanges under its direct regulation.
On August 7, Business Korea reported on the FIU’s decision to shift away from its current practice of regulating crypto exchanges indirectly by providing administrative guidance to domestic banks.
A shift away from indirect regulation
In order to bring crypto exchanges into the country’s regulatory system, an FIU official revealed on Aug. 6 that the South Korean government will introduce a crypto exchange licensing system, as recommended by the Financial Action Task Force (FATF). This will reportedly enhance the transparency of cryptocurrency transactions.
At a public hearing held at the National Assembly Member’s Office in Seoul, Lee Tae-hoon — who serves as head of administration and planning at the FIU — stated:
“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 added that should lawmakers approve the decision to shift away from “indirect regulation through commercial banks to direct regulation,” oversight of the sector would be more effective.
Commentators reportedly noted that regulatory amendments would need to integrate existing stipulations, which hold that banks must issue real-name accounts to crypto exchanges. This would ensure that crypto exchanges adhere to the same know-your-customer and anti-money-laundering standards as traditional financial institutions.
Impact of FATF guidance
This week’s news aligns with recent unofficial reports that four South Korean crypto exchanges were facing stricter regulation as they attempted to renew their banking accounts.
The tightened requirements were reportedly imposed in the wake of the FATF’s new June 2019 guidance for strengthening control over crypto exchanges in order to better combat money laundering.