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South Korean authorities are reportedly close to putting the final touches on regulations for bitcoin and cryptocurrency exchanges.
The Financial Services Commission (FSC), South Korea’s financial regulator and authority, is outlining regulations that will mandate cryptocurrency exchanges to play by its rules.
The regulator publicly revealed its intention to introduce regulations for bitcoin exchanges last year with a focus on regulatory and licensing parameters. “The government will push for the systemization of digital currency on a full scale in tandem with a global trend in the US., Japan and other countries,” said FSC chairman Yim Jong-yong at the time. Six months later, a lack of consensus among multiple Korean authorities, including the central bank and multiple governmental ministries, over a unified regulatory approach left the plan in limbo.
As the end of the year nears, the FSC is reportedly close to pinning final regulatory drafts, according to regional news daily Hankyoreh. The report suggests that the newly proposed regulations “would treat the operation of cryptocurrency exchanges (such as Bithumb, Coinone and Korbit) as unauthorized fundraising.” For context, cryptocurrency exchanges currently fall under e-commerce statues that allows them to operate as an e-commerce website by registering as an online vendor. Since cryptocurrencies aren’t recognized as legal tender nor a financial instrument, the regulations will chalk cryptocurrency exchanges under ‘unauthorized fundraising’, according to the report.
The designation, however, will not outlaw cryptocurrency exchanges. Instead, new regulatory guidelines will mandate trading platforms and exchanges to follow certain rules and measures.
An official from the FSC, as quoted by Hankyoreh, elaborated:
Cryptocurrency exchanges will be required to maintain standards for consumer protection, such as having separate deposits for customers’ assets, and for increasing transparency, such as having a procedure for confirming customers’ identity. The authorities will also be empowered to prosecute exchanges that break these rules.
The regulations will also prevent the abuse of cryptocurrencies from criminals using it as a tool for money laundering.
Speaking on Tuesday at a forum organized by Korean financial watchdog, the Financial Inteligence Unit, FSC vice-chairman Kim Yong-beom acknowledged the rapid rise in interest and adoption of cryptocurrencies like bitcoin and Ethereum in Korean society.
According to Yonhap, the regulatory official went on to state:
We will draw up thorough countermeasures that prevent cryptocurrencies, like bitcoin, from being a new channel for money laundering.
Korean authorities’ move to regulate the cryptocurrency industry is gathering pace at a time when the country is firmly established among the world’s largest trading markets for cryptocurrencies.