Crypto Regulations in South Korea
Currently, South Korea’s regulations on cryptocurrencies comprise an amendment to The Act on Reporting and Use of Certain Financial Transaction Information, which mandated crypto trading platforms acquire an information security certificate and provide users with real-name accounts.
This went into full effect in September 2021, aiming at reducing risks of money laundering, embezzlement, and price manipulation by banning anonymous trading.
The new Digital Asset Basic Act will emerge from 13 proposals to be debated in the National Assembly.
“The Digital Asset Basic Act is now in the research stage, and we expect to show palpable results [on the legislation] from the end of this year to the first half of 2023,” Jeong Jae-wook, a member of the ruling party’s virtual asset committee, said in June..
Source: Forkast
With the new president-elect Yoon Suk-yeol proclaiming the legalization of cryptocurrency fundraising, South Korea has become the latest country to reform cryptocurrency regulations and remove the ban on Initial Coin Offerings (ICOs).
The Financial Services Commission (FSC) of South Korea banned Initial Coin Offerings (ICOs) in 2017. According to the commission, the prohibition was prompted by crypto’s high volatility and speculation, and illegal activity within the country. The legal body had also prohibited all sorts of virtual currency fundraising. Its principal goal in enacting the ban was managing and monitoring virtual currencies.
Initial coin offerings are part of Yoon’s wider cryptocurrency pledges. The President-elect’s administration has promised to carry out 110 tasks, including improving crypto regulations and lifting the prohibition on ICOs in South Korea. The government will reportedly create a two-lane regulatory framework for ICOs, defining digital assets as securities and non-securities.
Source: Forbes India
The Financial Supervisory Service (FSS) of South Korea has hinted that some digital currencies might pass as securities under the country’s jurisprudence. Lee Bok-hyun, Governor of the FSS, disclosed his position to a local media house as he fielded questions related to the Terra-Luna collapse.
“I disagree with the view that some virtual assets do not have parts that can be recognized as financial investment products or securities,” said Lee to newsmen at the headquarters of the FSS. “As a lawyer or a person in charge of financial affairs, there is an option that if certain requirements are met, it can be judged as securities.”
Lee averred that prosecutions are well within their rights to attempt to determine whether or not a digital asset can be categorized as a security. He added that this prerogative does not lie with regulatory agencies, but that caution should be exercised in passing such judgments on virtual currencies.
Source: Coingeek
South Korea’s Financial Supervisory Service (FSS) began an investigation into payment gateway services that work with digital assets. The FSS is South Korea’s financial regulator that operates under the Financial Services Commission (FSC), both of which are government institutions.
As reported by local news outlet Money Today Co., the FSS had recently demanded reports from 157 payment gateways about any service related to crypto, its plans for the future and disclosure of digital assets. But, an FSS report stated that only six held any digital assets.
Source: Cointelegraph
Beginning in late 2020, Korean authorities pushed through an initiative to begin taxing crypto trading profits. On Jan. 6, an amended Income Tax Law was announced that called for taxing crypto income beginning in 2022. The amended law will tax 20% of the profit from crypto transactions over the amount of 2.5 million Korean won, or about US$2,200. Korea’s National Tax Service (NTS) has since expanded the crypto tax law on accounts by domestic investors to foreign crypto exchanges and businesses.
The issue at hand is the categorization of virtual assets. Right now, virtual assets are categorized under “other income,” which includes for example gains from trading in art. The government said there are special tax benefits to income from certain financial investments, and virtual assets aren’t categorized as financial assets in South Korea — hence the lower threshold for a tax deduction.
Industry members and some lawmakers insist the crypto tax should be deferred for one to two years until crypto is clearly defined. Conservative party lawmakers Yun Chang-hyun and Yoo Gyeong-joon proposed bills to delay the tax while democratic party lawmaker Noh Woong-rae proposed characterizing crypto capital gains as income from financial investment
Source: Forkast News
In March, South Korea passed new legislation to strengthen the supervision of virtual assets. The new law, however, has resulted in a pushback by banks and concerns that many of the altcoins and cryptocurrency exchanges that have sprung up in South Korea could be put out of business.
Under the new legislation all virtual asset management providers, which includes cryptocurrency exchanges and other virtual asset service providers, must register with the Korea Financial Intelligence Unit (KFIU) to operate in South Korea. The KFIU is the arm of the Financial Services Commission (FSC) responsible for anti-money laundering and exchanges would be required to report suspicious financial activity to it. In order to register, exchanges are required to be certified by the Information Security Management System, ensure their customers have a real name back accounts and ensure that their CEO and board members have not been convicted of a crime. The law also requires exchanges to provide proof of adequate levels of deposit insurance to cover losses from hacks.
Source: The Diplomat
South Korean cryptocurrency exchange laws are rigorous, including government registration and other procedures monitored by the Financial Supervisory Service of South Korea (FSS).
The South Korean government restricted the use of anonymous accounts in cryptocurrency trading in 2017 and restricted local financial institutions from hosting Bitcoin futures transactions, reporting suspicions of a ban. In addition, the Financial Services Commission (FSC) tightened reporting requirements for banks with crypto exchange accounts in 2018.
Source: Sanction Scanners
Promising investors a safer and more transparent trading environment, the FSC proclaimed a regulatory renovation on virtual asset exchanges by applying amendments to “The Act on Reporting and Use of Certain Financial Transaction Information,” which became effective starting March 25. This act requires the trading platforms to acquire mainly two things —an Information Security Management System (ISMS) certification, and a contract with local banks to provide withdrawal and deposit accounts for exchange users under their real names. The act gave crypto businesses six months to completely meet the requirements and report to the Financial Intelligence Unit (FIU).
The ISMS certification is given by the Korea Internet & Security Agency (KISA) to a virtual asset trading platform that meets the government standards for the protection of the personal information of its users.
Source: Forkast News
On 17 April 2018, representatives of 14 Korean digital currency exchanges, including Bithumb, Upbit, and OKCoin, released a set of self-regulatory guidelines for digital currency exchanges in South Korea. The exchange representatives are members of the Korea Blockchain Association. The self-regulatory guidelines involve an inspection of all member exchanges and require the satisfaction of five conditions: (1) manage clients’ digital coins and their own separately; (2) cope with abnormal transactions quickly; (3) float new digital currency with enhanced client protection systems; (4) hold minimum equity of KRW2 billion (US$1.8 million); and (5) publish regular audit and finance reports. The guidelines also recommend an inspection of exchange systems in order to identify “if there are loopholes that could be used for insider trading, price rigging and money laundering”. While none of these regulations is legally binding, they signal a clear movement toward transparency and government regulation.
Source: Law Asia
Kim Dae-jong, professor of business at Sejong University, told Forkast.News: “The South Korean government is, in essence, giving room for the crypto industry to develop on its own while eliminating risks of illegal activities. This will help Korea become a leading country in the fourth industrial revolution.”
On the other hand, professor Kim Hyoung-joong, head of the Cryptocurrency Research Center at Korea University, has expressed his concern on how financial authorities having more control over the exchanges may stifle innovation in Korea’s crypto space. Kim told Forkast.News: “The FSC is a very conservative agency. If it sees any risk, it tries to eliminate any further development. Hence, I do not believe that the FSC will support the adoption of new, innovative [crypto] services.”
Source: Forkast
A South Korean court has issued an arrest warrant for Do Kwon, the primary developer of cryptocurrencies Luna and TerraUSD, whose spectacular collapse in May roiled crypto markets around the world.
Kwon, also the founder of blockchain platform Terraform Labs, has been accused of fraud by investors in the wake of the collapse.
“An arrest warrant has been issued for a total of six people, including Do Kwon, who is currently residing in Singapore,” a spokesperson for prosecutors said on Wednesday without elaborating on the reason.
Source: Reuters
For examination of compliance and enforcement of Anti-Money Laundering requirements, the Korea Financial Intelligence Unit (KoFIU), established under the Financial Services Commission (FSC) is the apex government authority responsible. Additionally, the Supreme Prosecutors’ Office possesses the exclusive right to conduct criminal investigations and prosecution of AML-related offenses.
For investigating and prosecuting criminal money laundering offenses in South Korea, two authorities namely ‘The Prosecution Service’ and the ‘Korean National Police Service’ are responsible. In 2018, to strengthen its ability to identify and recover criminal proceedings, particularly in high-profile corruption and money laundering cases, The Prosecution Service set up the Criminal Asset Recovery Division (CAR).
Source: Coinfirm
South Korea’s regulatory sandbox has helped create almost 380 blockchain and other fintech jobs and generated around $110 million in investments.
According to Shina Ilbo, the sandbox is overseen by the government’s financial regulator, the Financial Services Commission, or FSC. It temporarily exempts companies from various regulations regarding financial services to aid with innovation and growth.
The report said that 16 companies have been recognized for their growth potential, and attracted more than 136.4 billion won ($110 million) in new investments.
Some of the companies participating in the government-sponsored program are pursuing business across 14 countries in Asia, including Indonesia, Thailand and Vietnam.
Within the sandbox, the FSC is assessing the usefulness and security of blockchain technology for things like real estate, chatbot services, and artificial intelligence-powered credit evaluation.
Source: Cointelegraph
