Published: March 9th, 2020
– In a surprising twist of events, the South Korean National Assembly has voted to amend an act of parliament thereby creating the country’s initial cryptocurrency-centric legislation. Altering the Reporting and Using Specified Financial Transaction Information Act that the finance committee of the parliament passed late last year put in motion the framework for defining the Land of the Morning Calm’s cryptocurrency industry.
On Thursday, the South Korean Parliament amended an act of parliament in a bid to create a pathway for regulating and legalizing cryptocurrencies and digital currency exchanges.
The house unanimously voted during a special session to amend the country’s Reporting and Using Specified Financial Transaction Information Act. The said act was approved by the finance committee of parliament late last year.
The move paves way for the creation of a framework that will guide the country’s cryptocurrency industry. Concerned agencies can now formulate policies and draft regulations that guide dealings in the cryptocurrency space. Among the processes that the agencies will work on include developing anti-money laundering regulations.
The East Asian country is a trailblazer in the cryptocurrency boom. It doubles as one of the few countries that have managed wide-scale adoption of blockchain technology. A vast majority of its population are also active investors in the blockchain and cryptocurrency space. A survey conducted back in 2017 indicated that almost 35% of the country’s workforce was actively investing in cryptocurrencies.
Besides, the country’s capital Seoul is one of the few cities around the globe that are working on a cryptocurrency project. Seoul’s S-coin is meant to provide the city residents with a way of participating in programs that benefit them socially.
The South Korean situation depicts a two-faced character, or at least that is what the administration looks like in the eye of an onlooker. During the same time that the blockchain blitz was gaining shape, the government moved to hastily put in place a raft of regulations that were supposed to curtail the advancement of the technology.
The action caused many substantial cryptocurrency price action and especially the price of Bitcoin. Investors elsewhere were keen to see how the Bitcoin and other cryptocurrency dealers in South Korea would react to the country’s actions. Last Thursday’s vote, as such, coming just after a few short years, is a complete turnaround by South Korean legislators. It confirms the slow but sure pace of acceptance of blockchain and cryptocurrencies.
The amendment affirms the role of cryptocurrencies in the financial services sector globally.
A segment of the amended laws demands that cryptocurrency exchanges and other related businesses comply with the reporting requirements that guide financial institutions. The South Korean government seems keen on fostering a robust know your customer (KYC) compliance procedures.
Cryptocurrency trade is legal in South Korea. However, the amendment means that cryptocurrency wallet providers and exchanges may now go an extra mile to verify the identity of their customers. Doing so will mean that they incur additional compliance costs.
The new laws, for instance, require each virtual currency service provider to meet all KYC protocols. The said companies must undertake real-name verification just as commercial banks do.
Exchanges will now need Information Security Management Systems (ISMS) certification from the Internet Security Agency of Korea (KISA), which is a costly undertaking for small and medium cryptocurrency enterprises.
The increased cost of compliance that is a result of the new laws may increase the overall price of doing business.
As expected, the South Korean cryptocurrency industry players warmed up to the news of the new law. Simon Kim who heads Hashed, a blockchain incubator based in Seoul said that the law eliminated the long-standing uncertainty over regulations, a situation that has clouded the country’s cryptocurrency space.
He added that since cryptocurrencies are now well-defined by the law, virtual asset holders and institutions now can operate appropriately under the said law. Kim concluded that the move affirms that South Korea is progressing and it is the perfect proving ground for blockchain technology and cryptocurrencies.
His sentiments were echoed by Mira Kim, a blockchain consultant based in Seoul who termed the news as “great.” He said that nobody is eager to welcome taxes and laws but went further to say that lack of legitimacy is also not healthy because it holds investors and institutions back. He added that the situation will change in just one year paving way for a fair fight between cryptocurrencies and the conventional fiat currency markets.
Janet Cho, an IT journalist added her voice to the debate by saying that this move is what the big South Korean blockchain companies have been championing for. she added that the ball is now in the court of these companies so it is up to them to react appropriately to the news. She, however, cautioned watch their next moves since what they do now on will highlight the intentions that they have had all along.
According to the Economic Mail, a local media outlet, the motion to amend the act was voted for by all the 182 legislators present in the chambers.
The law comes into effect 12 months from that date of its signing. However, cryptocurrency exchanges and other industry players will have a further six months to comply with the amended law. Cryptocurrency wallet providers and exchanges, as such, have until September 2021 to meet the requirements of the new law.
The decision by the South Korean parliament comes in the heels of news from the Supreme Court in India that recently overturned a ban imposed by the central bank on commercial banks prohibiting them from serving Bitcoin exchanges.
In a landmark decision, the South Korean parliament amended the Reporting and Using Specified Financial Transaction Information Act. The move paves way for the drafting of rules that guide the cryptocurrency space in that country. Industry players hail it as a good move. Small and medium-sized cryptocurrency exchanges, however, think that complying with the stringent laws will increase the cost of doing business.