Korea to Hasten Crypto Regulation After Bithumb Hack

As reported, recent Bithumb hack will fasten the process of implementing the country’s first crypto regulatory framework
20 June 2018   418

South Korean authorities have previously announced that they will regulate the exchange of cryptocurrency on a par with banks and tighten the requirements for them. Today's hack of the Bithumb exchange will speed up the process of developing the first fully-fledged legal framework for cryptocurrencies regulating in the country, CCN reports.

On June 11, after several months of discussions, the South Korean government and local financial regulators, including the Financial Intelligence Service, came to the conclusion that it was necessary to properly regulate the crypto-currency market with an eye to protecting investors and preventing large-scale hacker attacks.

Under current regulations, there are clear limitations in preventing money laundering on crypto exchanges because the only way authorities can spot suspicious transactions is through banks. If the bill of lawmaker Jae Yoon-kyung from the Democratic Party of Korea passes, local authorities will be able to impose identical regulations on crypto exchanges that are implemented on commercial banks.
 

Spokesperson from the Korea Financial Intelligence Unit 

 Despite the absurdity of the situation, at present, the crypto exchanges in South Korea is regulated as providers of communication services. In other words, to start the exchange it's enough to have about $ 30. Since exchanges of digital currencies have this status, government agencies and financial regulators do not directly supervise their activities.

On June 18, for the first time in history, local authorities acknowledged that the South Korean government was slow to implement rules to regulate the scope of the cryptocurrency, because it feared that investors would perceive this as a permissive signal for investing in digital assets and a sign of their legitimacy.

An increasing number of officials begin to share the view of a member of the National Assembly Committee Park Yong-kin, who said in late 2017 that the government cannot simply leave cryptocurrency exchanges unregulated because it only worsens the cryptocurrency sector.

We are frustrated as well. We fully understand that the government is reluctant towards regulating the cryptocurrency market because it will inevitably lead investors to consider it as the government’s way of legitimizing the market. But, if the government leaves the cryptocurrency market unregulated, it is simply leaving it vulnerable to variou issues.
 

Park Yong-kin

Member, National Assembly Committee

Local analysts say that officials already planned to speed up the development of measures for control in the cryptocurrency sector after hacking of CoinRail exchange, and the attack on Bithumb, which neither investors nor authorities were ready, will force lawmakers and regulators to present legal acts that will put the crypto exchange on one step with the banks, in even shorter terms.

Once the law is passed, the exchange need to work with local financial authorities and comply with safety standards if they want to continue to operate in South Korea. It is expected that the intervention of the Financial Intelligence Service and the Financial Services Commission will lead to significant improvements in the data processing, security and infrastructure of such sites.

Korean Exchanges to Ban Withdrawal for Unverified Users

This decision was made by Bithumb and Coinone for anti-money laundering policy implementation
18 September 2018   158

Bithumb and Coinone will deprive unverified users of the possibility to withdraw funds, Bitcoin.com reports.

The possibility of withdrawing the crypto currencies to Bithumb will be discontinued on October 1 for corporate market participants. For individual users, this restriction will take effect on October 15. According to the representatives of the exchange, the decision was made to implement the requirements of the anti-money laundering policy.

Representatives of the trading platform stressed that the limitation concerns only the possibility of issuing fiat funds.

The South Korean authorities ordered local crypto-exchanges to verify users in January. Exchange customers can use the so-called "real name system" to convert their accounts into verified and linked to the accounts of banks cooperating with platforms.

However, by now banks have provided this service only to the four largest South Korean exchanges - Bithumb, Upbit, Coinone and Korbit. Moreover, despite the efforts of the government, banks and the cryptoexchanges themselves, only 40-50% of traders took advantage of this service. At the same time, local banks exert pressure on the exchanges, so that the latter more actively comply with the requirements of the anti-money laundering policy.

A similar statement was made by the Coinone Exchange, all unverified users of which will not be able to withdraw Fiat after October 15.