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.