September 28, 2021

South Korea Takes First Step to Regulate Virtual Asset Service Providers

By Euihyun Bae

Global interest in combating illicit uses of virtual assets continues to grow, and South Korea is setting a global precedent with sweeping regulations on its virtual asset industry. Although in line with anti-money laundering and counterterrorism financing recommendations from the Financial Action Task Force (FATF), these regulations failed to provide most Virtual Asset Service Providers (VASPs) with ample registration time, which will likely result in a monopolization of the South Korean virtual asset industry under a select number of VASPs.

Global interest in combating illicit uses of virtual assets continues to grow, and South Korea is setting a global precedent with sweeping regulations on its virtual asset industry.

Following coordination with the FAFT, the South Korean National Assembly amended the “Act on the Reporting and Use of Specific Financial Transaction Information” to require all VASPs to receive Information Security Management System (ISMS) certifications and partner with Korean banks to create “real-name” verified bank accounts for customers. Under the amendment, all VASPs, including foreign VASPs operating in South Korea such as Binance, are required to register with the Korea Financial Intelligence Unit (KoFIU) for license approval within six months, a period that ended on September 24. After the registration deadline, VASP operators who continue conducting business without the license will be subject to criminal and fiscal penalties, including prison sentences up to five years and/or fines up to roughly $42,000. However, the new government requirements involve more than just receiving a proper license as registered VASPs are required to follow anti-money laundering guidelines, including verifying customer identity and filing reports on suspicious and/or large currency transactions.

Read the full article from The Diplomat.

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