South Korean Parliament unanimously passes "Special Financial Transactions Law," officially legalizing cryptocurrency trading

The South Korean National Assembly unanimously passed a revision of the "Special Financial Transactions Information Act" yesterday. The amendment outlines how the government should regulate Virtual Asset Service Providers (VASPs) and formally legalize cryptocurrency transactions within the framework of policies such as Anti-Money Laundering (AML). Exchanges are also classified as financial institutions (previously categorized as information providers, not financial institutions).

The relevant regulations will be formally implemented one year after their promulgation, followed by a six-month grace period.

• Cryptocurrencies are officially classified as assets
• Cryptocurrencies are considered valuable intangible assets

Just recently, the Supreme Court of India overturned the central bank's ban on cryptocurrency trading, potentially opening up a massive market for the global crypto ecosystem with over 1 billion people in the country, sparking joy in the crypto community.

Yesterday, the Financial Services Commission (FSC) of South Korea swiftly revised the Special Financial Transactions Act proposed in November 2019, which was approved by the South Korean parliament, aiming to restructure the country's blockchain industry.

According to the FSC press release, regulatory authorities are working to establish a new framework, recognizing cryptocurrencies as valuable intangible assets. Cryptocurrency-related businesses such as exchanges, trusts, and custodian service providers are required to comply with anti-money laundering (AML) rules and complete KYC procedures by the end of the first quarter of 2021.

The official regulations include requirements for cryptocurrency-related companies to comply with anti-money laundering regulations, report to and register with the Financial Services Commission regularly, and mandate users to use access accounts that can be verified with real-name authentication. Additionally, operators must meet certain conditions, including confirming personal information, having no criminal history, and passing Information Security Management System certification (ISMS). Penalties are also set, with businesses that fail to report operations subject to imprisonment of up to 5 years and fines of up to 50 million Korean won. Financial institutions dealing with digital asset operators also have audit responsibilities.

In Taiwan, the STO-related legislation that officially took effect this year has similar requirements for "exchanges," but it only regulates exchanges related to security token offerings (STOs).

Simon Kim, CEO of the Seoul-based blockchain incubator Hashed, stated that with the new amendments, South Korea will soon become a leading representative of blockchain technology:

Until now, there has been a great deal of uncertainty in South Korea's cryptocurrency regulations. However, with the enactment of the new law, cryptocurrencies have been officially classified as assets by the government, and virtual asset operators can operate in South Korea under appropriate laws. I believe this is a significant step forward for South Korea and will serve as a perfect testbed for global blockchain and cryptocurrency innovation.

Sunga Kim, CEO of Hanbitco, one of South Korea's mainstream cryptocurrency exchanges, mentioned that the new regulations will help reduce fraudulent activities in the industry:

We have established a foundation to eradicate the long-standing stigma of fraud in cryptocurrency trading and to make it a transparent and reliable industry. With the influx of new funds, the industry as a whole will flourish.

With the release of this major positive news, South Korea's mainstream public chain project ICON (ICX) surged by 25% yesterday afternoon, currently trading slightly lower at $0.37, ranking 39th by market capitalization.

It is reported that this amendment still awaits approval from South Korean President Moon Jae-in to be formally signed into law and become part of the legal system. If approved, it will take effect in March next year and by September 2021, all cryptocurrency businesses must be fully compliant.

Further Reading

• SEC takes major action to relax financing limits and simplify securities issuance exemptions
• UK Financial Regulator warns BitMEX services in the UK are unauthorized

Join Telegram now for the most accurate information on financial technology, blockchain updates, and industry examples!