On March 5, South Korea’s National Assembly passed a revised bill on the reporting and use of special financial transaction information, focusing on the introduction of a permit system for cryptocurrency exchanges.
Accordingly, virtual asset operators such as cryptocurrency exchanges would have to report their operations to the Financial Intelligence Unit (FIU) under the Financial Services Commission after obtaining “real name-confirmed accounts” from commercial banks. Failure to report operations could result in up to five years in prison or 50 million won ($42,000) in fines.
The bill, to be implemented in March next year, calls for existing crypto exchanges to meet requirements for a real-name account and ISMS authentication, and to report their operations within six months after the law’s implementation.
The Financial Supervisory Service and the FIU will also strengthen the Anti-Money Laundering (AML) system for virtual assets such as cryptocurrency in accordance with the recommendations by the Financial Action Task Force ahead of the law’s implementation.
The revised bill will speed up the preparation of sub-law regulations, including the scope of virtual asset businesses subject to AML requirements, and conditions and procedures for issuing real-name accounts.
Only the strong will survive?
Thus far, only four large cryptocurrency exchanges — Upbit, Coinwon, Bithumb and Korbit — have used real-name accounts. Most others have reportedly relied on honeycomb accounts, through which they received investor money with their own corporate accounts to support customer transactions.
As the conditions and procedures for banks to issue real-name accounts to crypto exchange become stricter, small exchanges utilizing honeycomb accounts will be forced either to comply or exit the industry.