South Korea is one of the key player globally in the field of cryptocurrencies. No wonder just a couple of months ago greater than 40% of Ripple trade volume was from Korea alone. Noticing ever increasing participation of Koreans in cryptocurrencies, Korean Financial Intelligence Unit (KFIU) and other local financial agencies are proposing to regulate cryptocurrency exchanges similar to banks, enacting strict anti-money laundering (AML) laws to ensure criminals do not utilize and transfer cryptocurrencies wealth through illegal channels.
Many other countries like US, Japan, Russia, China have already hinted for tighter regulations and control on cryptocurrencies exchanges and their funds transfer. News were announced after a Policy Advisory Council meeting on June 8. During the meeting KFIU director Kim Geun-ik led an extensive discussion on existing money laundering and terrorist financing prevention regulations and proposed stricter policies for both commercial banks and financial service providers.
Money laundering, criminal activities, terrorism are a major growing concern among governments these days, as there is high probability that cryptocurrencies might be utilized to fund illegal activities. Anonymity and almost impossible tracking of cryptocurrencies transactions further add to the concern. Therefore, KFIU is proposing to impose stricter AML and Know Your Customer (KYC) regulations for anyone dealing in cryptocurrencies and urged banks to be open and transparent about any crypto related transactions.
Currently, South Korean cryptocurrency exchanges can operate as a communication vendor, with a paltry $40 license fee. With the current setup, no government or financial organization has control to audit and investigate any cryptocurrency exchange, platform or service provider, leaving room for illegal activities. However, KFIU is urging Korean Congress to pass a bill which will bring cryptocurrency exchanges to be regulated with the same level of scrutiny as commercial banks and other financial institutions. If this Korean bill passes successfully, it will only lead to cryptocurrencies approval and validation by governments elsewhere.
Although, according to recent research less than 1% of all Bitcoin transactions is being used for laundering purposes, the report still asks for stronger AML and KYC regulations to minimize misuse. Assuming a daily Bitcoin trading volume of $5 billion, 1% would be easily around $10 million, which no doubt is a big sum of money.
Although, stricter regulations will add to some pain for users and exchanges, in the long run it is going to provide a stronger footing for cryptocurrencies and greater adaptation of cryptos in people’s daily life.
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