South Korea’s National Assembly has just passed regulations that will result in a ‘restructuring of cryptocurrency exchanges.’ The ramifications of the new laws are enormous, resulting in mandating real-name accounts on exchanges as a means to curb money laundering.
Media outlets are reporting that South Korea’s National Assembly today passed an amendment that would enforce virtual asset service providers to report business operations based on real-name accounts provided by banks. The law requires these providers, including exchanges, to partner with Korean banks to ensure real-name accounts.
The law, proposed earlier this week, was considered in a bid to prevent any money laundering schemes that might occur with digital assets. This has become an issue that many governments around the world are concerned with.
Any virtual asset service providers, such as a cryptocurrency exchange, that do not follow the new mandate will be subject to punishment of up to five years in prison or a fine of 50 million won. The reports also suggest that exchanges that do not follow the new rule will be driven out of the market. Upbit, Bithumb, Coinone, and Cobit are the only exchanges that currently follow this rule.
The law will come into effect in March 2021.
South Korea Steps Up Regulations, Businesses Struggle
South Korea has been pioneering cryptocurrency regulations on many fronts. Indeed, cryptocurrencies are popular in the country, but the regulation is far from discouraging or draconian. Officials, for the most part, see the potential in the emerging asset class.
In late February, South Korean officials proposed a new tax policy that would take place in two phases. The new tax reform policies are expected to be revealed towards the end of 2020 but are expected to impose taxation on low-level cryptocurrency trading before a gradual income tax was applied.
Having said that, exchanges and blockchain companies in South Korea are going through a rough patch, as major conglomerates have all moved to enter the blockchain space — most notably Samsung. 97% of South Korean exchanges are nearly bankrupt, with low trading volumes, while 80% of South Korean blockchain companies generated no sales last year.
2020: The Year for Mainstream Cryptocurrency?
South Korea has examined cryptocurrencies very closely over the past two years and has done much to make the market more attractive to both retail investors and businesses. Furthermore, it has explicitly mentioned that consumer protection is a key facet in its scrutiny — only natural and sensible given the scams that have operated.
Similarly, other countries are beginning to open themselves up to the digital assets market. Just earlier this week, India’s Supreme Court struck down a central bank order that prevented banks from serving Indian exchanges.