The South Korean government has just revealed details about the new bill to regulate crypto exchanges. Local media reports that this move follows reports of multiple security breaches at cryptocurrency exchnages.
South Korea’s largest crypto exchange, Bithumb, posted a notice on its website on Tuesday, June 19. The exchange also tweeted that about 35 billion won (about US$31 million) worth of cryptocurrency was stolen. The exchange promptly removed and deleted its tweets about the theft not long after. This happened just 10 days after Coinrail, the country’s seventh largest crypto exchange was hacked with damages estimated at about $40 million.
The chairman of the country’s top financial regulator: the Financial Services commissions (FSC), Choi Jong-ku, commented on the Bithumb news on Wednesday. Newsis quoted him saying: “In order to prevent this, we need to make the [crypto] transaction system stable and strengthen the protections of the traders by virtual currency handling businesses.”
According to him the bill’s Act on Reporting and Using Specified Financial Transaction Information has been submitted to the National Assembly in order to achieve this.
Newspim wrote that crypto exchanges are currently “in the blind spot” of the Korean regulators. The news outlet added that they are “expected to be monitored by the financial authorities through the ‘report system’.” The publication elaborated, “This will block illegal money laundering using virtual currency exchanges and enhance the rules for transactions with commercial banks in cooperative relations such as opening virtual accounts.”
The publication described that according to the proposed bill, the government “will define a virtual currency exchange as a virtual currency handling business.”
The news outlet: “If the bill passes the National Assembly, a virtual currency exchange must be obliged to report to the Financial Intelligence Unit (FIU) as a virtual currency handling business and be regularly supervised by the FIU.” If any illegal activity is found by the authorities, then the Financial Supervisory Service (FSS) and the FIU will inspect and investigate them.
FIU’s Director of Planning and Cooperation Team, Son Sung-eun, was quoted saying: “We could not afford to let virtual currency centers become a hotbed for money laundering.”
The proposed amendment also obligates all financial companies to “preserve financial transaction data and information related to the implementation of obligatory transaction reporting, high cash transaction reporting, customer confirmation, etc. for five years.”
Any crypto businesses that violates or fails to comply with the financial regulators’rules will be sanctioned accordingly. The sanctions include “recommending the dismissal of officers at the same level as banks and securities companies, suspending business operations, warning of institutions, and corrective orders.”