Financial regulators in South Korea have announced proposals that will directly regulate cryptocurrency exchanges, bringing firms under the remit of the regulator for the first time, BusinessKorea reported.
The Financial Services Commission (FSC) currently indirectly regulates exchanges by issuing administrative guidance to the banking sector, under its Financial Intelligence Unit.
The new proposals announced Wednesday clarifies the regulatory position for exchanges, and will see a raft of new measures introduced to regulate the industry. As part of the proposals, a new crypto licensing scheme is set to be introduced in Korea, as recommended by the Financial Action Task Force (FATF), in a bid to improve the transparency of crypto transactions, as well as imposing common standards on crypto exchanges.
Senior officials have said the move is required to prevent money laundering through the cryptocurrency markets.
Head of administration and planning at the FIU, Lee Tae-hoon, was quoted by the news outlet saying the new structures of regulation would reflect FAFT’s international standard for crypto exchanges: “If an amendment to the Act on Reporting and Use of Certain Financial Transaction Information, which reflects the FATF’s international standards for cryptocurrencies, passes the National Assembly, it will be possible to prevent money laundering through cryptocurrencies.”
He described the move as a switch from the current, indirect model of regulating exchanges via commercial banks, to a direct model where exchanges are directly accountable to the licensing regime and the regulator.
“If the amendment is approved by lawmakers, we can raise the effectiveness of regulations by shifting from the current indirect regulation through commercial banks to direct regulation,” Lee said.
This is expected to include stricter requirements for ID for account issuance at crypto exchanges,