On June 8th, the South Korean Advisory Committee met to develop a legal framework for national crypto exchanges. Following the Coinrail Market’s recent hack, the South Korean government is enforcing stricter investor protection guidelines: Know Your Customer (KYC) and Anti-Money Laundering (AML).
Crypto-exchanges are recognized as financial institutions
With the intention of developing new strategies for traditional financial institutions, the Korean Financial Intelligence Unit (KFIU) has included crypto currency exchanges in the discussion to find new ways to regulate the emerging market. The South Korean government is taking steps to implement new KYC and AML guidelines for financial institutions on the $ 33-million hack of the Korean crypto-exchange Coinrail. Currently, the Korean Free Trade Commission is not authorized to access or monitor cryptographic exchanges and their clients.
An interesting twist is that the Korean Financial Intelligence Unit (KFIU) now recognizes crypto exchanges as big financial institutions, so that the legitimacy around the Bitcoin market continues to grow. However, this also means that the crypto exchanges are subject to the same scrutiny as commercial banks and stock exchanges. This also makes sense after it has recently become known that Bitcoin exchanges have offered the respective ICO projects to artificially influence the volume to appeal to investors. A KFIU spokesman described the impact of looming regulation and said to CCN:
“Under current regulations, there are clear limitations in preventing money laundering on crypto exchanges because the only way authorities can spot suspicious transactions is through banks. If the bill of lawmaker Jae Yoon-kyung from the Democratic Party of Korea passes, local authorities will be able to impose identical regulations on crypto exchanges that are implemented on commercial banks.”
Korean government is reluctant to legitimize cryptocurrencies so far
In an article released last year, Korean media company Hankyoreh revealed that the Korean authorities encouraged policymakers to develop earlier stricter laws to regulate the cryptocurrency. At that time it became clear that the Korean government deliberately renounced a regulation in order to shift the legitimacy of the markets.
As the cryptocurrency and blockchain industries grow rapidly, a regulatory framework is needed to make the market more transparent and accessible. Institutional investment companies such as Goldman Sachs and the NYSE are gradually using Bitcoin and other cryptocurrencies as a new asset class. The entry of institutional companies and the regulatory development will be the prerequisites for the worldwide launch of cryptocurrencies.
Japan is already taking on a pioneering role to create a regulatory framework. It seems as if the Asian region is trying to create market conditions in the near future to be considered a future blockchain valley.