South Korean National Assembly Decided to Regulate Virtual Asset Service Providers!

After long legislative pause, parliamentary discussions on regulating cryptocurrency industry have finally taken place.

On November 21, the National Policy Committee of the South Korean National Assembly introduced a package of amendments to the Act on Reporting and Use of Certain Financial Transaction Information which was respectively proposed by the four members of the legislative assembly; Che Yoonkyung, Jeon Jaesoo, Kim Byongwook and Kim Soomin.

Among the four proposed amendments, the committee partially revised and passed Kim Byongwook’s amendment. Kim Byongwook’s amendment reflects the FATF(Financial Action Task Force; transnational regulatory body)’s Recommendations on regulating virtual assets and virtual asset service providers.

Key Points
Definition of virtual asset and virtual asset service provider
Licensing virtual asset service providers
Virtual asset service providers’ duty to report to the Korean Financial Intelligence Unit
Obligation to perform Know Your Customer (KYC)
Obligation to manage each customer’s transaction history

The voices of cryptocurrency industry were reflected in the amendment. Let’s take a look!

Change 1. The ‘virtual asset handler’ in the previous revision has been changed to ‘virtual asset business.’ A term equivalent to Virtual Asset Service Provider(VASP) in the FATF guideline, ‘virtual asset businesses’ include any business providing virtual asset related services such as cryptocurrency exchange, wallet services, custody services etc.

Change 2. The criteria for real-name verified deposit account have been eased. Currently only four cryptocurrency exchanges(Bithumb, Upbit, Coinone, Korbit) could have bank accounts. Other exchanges will be able to open bank accounts and meet the requirements for virtual asset business license system.

Change 3. A grace period for re-acquiring Information Security Management System(ISMS) will be granted before virtual asset business license is expired. The grace period regulation, which was not included in the previous revision, was added in consideration of the cost and time of obtaining the certification.

Amending the AML Act means that virtual asset service providers who have been operating outside the regulatory system, are finally within the legal boundaries and bear anti-money laundering duties as the existing financial institutions do.

The revision bill passed by the subcommittee of the National Assembly’s National Policy Committee is set to be approved by the National Policy Council, the Legislation and Judiciary Committee and the plenary meeting scheduled for November 25.

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Author Austin Mitchell Lewis

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