Local crypto exchanges will not be allowed to handle privacy coins from March 2021 onwards
The South Korean Financial Services Commission (FSC) announced yesterday that virtual asset providers situated in the country will no longer be allowed to handle any digital assets that present a high risk of money laundering.
These updates were published as part of the guidelines of the Special Payment Act, a regulation that focuses on the legality of cryptocurrencies in South Korea. The Financial Intelligence Unit (FIU) called out “dark coins” in particular, which are privacy-oriented cryptocurrencies with transaction records that make it difficult for the FIU to trace. This may have an effect on the usage of privacy coins, such as Zcash (ZEC), Monero (XMR), and Dash (DASH).
Amendments made by the financial watchdog to the Special Payment Act are expected to be enforced as soon as March 2021. The crypto bill calls for exchanges in the country to start employing sufficient Know Your Customer (KYC) and anti-money laundering (AML) policies. They are also obliged to report their operations within six months of the law’s implementation.
Apart from not handling privacy coins, virtual asset service providers need to confirm the real names of their customers by authenticating them against personal data, such as national identity numbers.
A lot of crypto exchanges based in South Korea do not list privacy coins because of existing international regulations. In September 2019, the South Korean branch of OKEx removed ZEC, XMR, Dash, Horizen (ZEN) and Super Bitcoin (SBTC), due to the guidelines set out by the Financial Action Task Force (FATF). Upbit, a local crypto exchange, announced in that same month that it would stop providing trading support for the three privacy-focused cryptocurrencies (ZEC, XMR and Dash).
Last month, the internet was abuzz regarding which entity should take responsibility for countering North Korean hackers that are targeting South Korean cryptocurrency exchanges. The FSC replied to a written inquiry from the National Assembly’s Political Affairs Committee on the 23rd of October, stating that they are not responsible for the crypto stolen during attacks from hackers that are sponsored by the regime of Kim Jong-un.
The watchdog stated that crypto exchanges do not fall under their jurisdiction, and forwarded the responsibility to the Ministry of Foreign Affairs and the Korea Communications Commission (KCC).
The opposition party secretary of the National Assembly’s Political Affairs Committee, Representative Seong Il-jong, reminded the FSC that “with the passage of the revised South Korean crypto bill, all crypto-related matters became the task of the Financial Services Commission.”