Bosses of cryptocurrency exchanges that fail to register with South Korea's top financial regulator may soon face jail time.

Earlier on Thursday, the National Assembly's Amendment Subcommittee on Parliamentary Affairs passed a legal amendment to the still-in-development Special Financial Transactions Information Act to force virtual asset exchanges to register with the Financial Services Commission (FSC). Those failing to do so would face up to five years in prison or a fine of up to 50 million won ($42,460), according to a report from CoinDesk Korea.

Under the amendment, aimed to align the industry with international anti-money laundering guidance from FATF, crypto exchanges must also have so-called real name virtual bank accounts – sub accounts for users within an exchange's primary account – to avoid falling foul of the legislation.

According to the report, opposition lawmakers had expressed concerns that that exchanges without real-name virtual accounts would be forced to close, bringing further contraction of the domestic cryptocurrency industry.

In early 2018, the FSC outlawed anonymous virtual accounts with the result that only four exchanges were left with real-name virtual accounts through contracts with local banks: Bithumb, Upbit, Korbit, and Coinone.

As a result of the concerns, the amendment, if passed into law, would make it easier for exchanges to qualify for real-name virtual accounts.

Lee Jun-haeng, CEO of the Gopax exchange, which does not have a real-name virtual account as yet, said the change would make for a "healthy" market as long as the system is fair.

Also loosened in the legislation is the obligation for certification of an exchange's information security management system. The committee agreed to give a grace period for reapplication should certification fail initially.

The Special Financial Transactions Information Act would ultimately mean that the crypto-related industry will move out of a regulatory gray area and enter the system as regulated financial institutions like banks, CoinDesk Korea says.

“It is expected to be the first step in the development of consumer protection and a stable market,” according to Jae-Jin Kim, secretary general of the Korea Blockchain Association.

The act, including the new amendment, is likely to be passed by the National Assembly, the report says. However, the amendment may see more changes after review from other government bodies.

Disclaimer Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.