10 months of grace period is left until the Financial Action Task Force (FATF) reviews the implementation status of each member state at the general assembly. Each member state will have to enact or amend law for regulating cryptocurrency for the rest of the year. Republic of Korea considers adopting a cryptocurrency exchanges licensing regime in line with changed international standards. Last week, the Financial Services Commission met with cryptocurrency exchanges to hear their views on revising the Act on the Reporting and Use of Specific Financial Transactions Information (financial information act hereafter).
At the meeting attended by the Financial Services Commission, the Korea Financial Intelligence Unit (KoFIU), and several cryptocurrency exchanges, including Upbit, Bithumb, Coinone, Korbit, Gopax, Hanbitco, Daybit, CPDAX, Blocko, Glosfer, and others, the licensing system for cryptocurrency exchanges was discussed.
The exchange licensing system, which was included in the revision of the financial information act proposed by Democratic Party lawmaker Kim Byungwook in March, provides real-name verification deposit service (real-name virtual account) and ISMS (Information Security Management System) certification as the main requirements. According to the revision, cryptocurrency exchanges must acquire real-name verification deposit services and ISMS authentication for accreditation.
Currently, the only real-name virtual accounts received are Upbit, Bithumb, Coinone, and Korbit. Except for these four exchanges, small and medium-sized exchanges use corporate accounts. However, the exchanges expressed that real-name virtual accounts do not need to be mandatory if they comply with the anti-money laundering (AML) regulations. Also, they have raised a complaint about the fact that the current bank criteria for issuing real-name virtual accounts are not clear.
Regarding ISMS certification granted by the Korea Internet & Security Agency (KISA), there were some complaints about the costly fee and long certification time. As with real-name virtual accounts, other small and medium exchanges, except for six ISMS-certified exchanges, suggested “we should be able to obtain license if we have an anti-money laundering system that meets international standards without an ISMS certification.”
Furthermore, the regulating authorities are said to have heard comments on the exchanges’ screening process for coin listing, custody services and dark coins. We look forward to continuing talks between the cryptocurrency industry and regulating authorities to introduce regulations that reflect the unique characteristics of cryptocurrency in the near future.