The exchanges, which are listed under the new category of business, will be able to offer trading platforms with necessary guidance and support from local regulatory authorities.
The policies laid out by the regulators are referred to as “unified regulations”. These policies encompass all activities of South Korea’s cryptocurrency Operators. The newly framed policies also includes stipulates stringent rules to prevent money laundering and other illegal activities. The Financial Services Commission (FSC) prepared the guidelines for the newly categorized industry. The Financial Supervisory Service (FSS) of South Korea is directed by the Financial Services Commission (FSC), which oversees monetary policies.
According to the Korea Times, two officials have made the following comments:
Establishing unified rules is a complicated issue given the broader range of assessments between government agencies. This is why the country needs close international cooperation as it is still in the early stages of fine tuning guidelines.
The FSC made revisions to its rules to apply strengthened policies in order to prevent or detect money laundering and illegal activities because the regulator isn’t opposed to cryptocurrencies.
Both agencies have stated that they will not modify the government’s position on cryptocurrencies as it is not easy to assess them as “financial assets”. Notably, the regulators had earlier classified cryptocurrencies as “non-financial” products, considering the volatility and speculative nature.”
While South Korea acknowledges cryptocurrencies as a thriving industry, the authorities are concerned about scams, money laundering, and volatility as issues plaguing the industry. A trade ministry official said
“Any major reversal in policies is unlikely, but the government seems to believe a gradual shift in attitude toward crypto-based assets is needed. What regulators should do is figure out how to regulate them properly and prudently as Korea needs to put more emphasis on blockchain technology after obtaining knowhow and understanding of the possible flipside of cryptocurrency trading.”
The newly created regulatory framework may have a short-term negative impact on both operations of cryptocurrency exchanges because clients will be forced to comply with Customer (KYC) and Anti-Money Laundering (AML) policies.
Furthermore, all cryptocurrency exchanges operating in South Korea, including Bithumb, Korbit, and Coinone may have to revamp their operations to suit the new guidelines. In the long-term, this will prove beneficial as institutional investors will be interest to participate in various blockchain projects, leading to better transparency, valuation, and pricing mechanism.
South Korean authorities will also make the necessary changes to facilitate the development of DApps and smart contract launching networks such as Ethereum and EOS.
Earlier on, crypto exchanges were perceived as communication vendors. Therefore, a $20 license was enough to operate a trading platform. It will not be so in the upcoming months. However, going forward, crypto exchanges must obtain necessary approval from the country’s department of financial intelligence and cybersecurity officials.
Moon Byung-ki, SK Infotech’s high-tech department director, is of the opinion that lack of regulations kept away large and established players away from South Korea. Moon Byung-ki said “Small to medium-sized cryptocurrency exchanges delay the implementation of necessary security measures and are only focusing on business expansion.”
Small exchanges will face a tough time in getting the necessary approvals from the South Korean authorities.