Korean Government’s Solution
Following recent reports of multiple security breaches at cryptocurrency exchanges, the South Korean government has revealed the details of the new bill to regulate crypto exchanges, local media report.
On Tuesday, June 19, South Korea’s second largest crypto exchange, Bithumb, posted a notice on its website and tweeted that about 35 billion won (~US$31 million) worth of cryptocurrencies was stolen. However, the exchange promptly removed the notice and deleted its tweets about the theft shortly afterward. The Bithumb incident came just 10 days after the country’s seventh largest crypto exchange, Coinrail, claimed that it was hacked on June 10, with the damage estimated at approximately $40 million.
Choi Jong-ku, Chairman of the country’s top financial regulator, the Financial Services Commissions (FSC), commented on the Bithumb news on Wednesday. He was quoted by Newsis saying:
He explained that an amendment bill to the Act on Reporting and Using Specified Financial Transaction Information has already been submitted to the National Assembly in order to achieve this.
Crypto exchanges are currently “in the blind spot” of the Korean regulators, Newspim wrote, adding that they are “expected to be monitored by the financial authorities through the ‘report system’.” The publication elaborated, “This will block illegal money laundering using virtual currency exchanges and enhance the rules for transactions with commercial banks in cooperative relations such as opening virtual accounts.”
According to the proposed bill, the government “will define a virtual currency exchange as a virtual currency handling business,” the publication described, noting that the obligation to prevent money laundering will be imposed on all crypto handling businesses.
“If the bill passes the National Assembly, a virtual currency exchange must be obliged to report to the Financial Intelligence Unit (FIU) as a virtual currency handling business and be regularly supervised by the FIU,” the news outlet detailed. If the authorities find any illegal activities, then the Financial Supervisory Service (FSS) and the FIU will inspect and investigate them.
Son Sung-eun, FIU’s Director of Planning and Cooperation Team, was quoted saying:
The proposed amendment also obligates all financial companies to “preserve financial transaction data and information related to the implementation of obligatory transaction reporting, high cash transaction reporting, customer confirmation, etc. for five years.”
Penalties and Punishments
Sanctions will be imposed on any crypto businesses in violation of or failing to comply with the financial regulators’ rules. They include “recommending the dismissal of officers at the same level as banks and securities companies, suspending business operations, warning of institutions, and corrective orders.”