By
Steve Muchoki
April 18th, 2024
South Korean regulators have taken a decision that it is better to introduce important changes within the crypto industry rather than just put a major ban on it.
The Indian government has recently made a move to crypto legalization. Ukraine, Canada, Belarus, the EU, and some other regions are joining the government-backed stablecoin fuzz. While looking at the situation, South Korea has recently legalized crypto, with a major Amendment.
The Amendment will substantially change some parts of the Special Reporting Act. The South Korean National Assembly gave the draft bill a green light after the afternoon session on March 5. As a result, people who hold cryptocurrency business in the country will have to file extended reports. Also, the current blockchain infrastructure will receive significant restructuring to fit the new taxation schemes.
Cryptocurrency Exchanges Will Report CEO’s Real Name
Any crypto-related business now has to open a local bank account using the real name of the company’s representative. It is a big requirement touching exchanges, custody wallets, trusts, and ICO startups. Only in case the company has an account in Korean bank, they could operate freely. Otherwise, penalties and even jail terms await the people tricking the law.
According to the regulation model, any crypto exchange will have to enact one bank account, tied to the real person. And then, the exchange will use that account to receive and send cash related to on-site client requests. Reports say that big local firms already have everything that is needed to comply. But medium-sized services may have troubles and need to fix their business models. For instance, some of the small crypto exchanges like to use third-party payment providers to send cash to their clients.
In the new regulatory framework, such a blatant workaround will not happen. It is good because the clients of small exchanges must protect themselves from laundered coins and criminal activity of the exchange bosses.
New Laws Reshapes South Korea, Crypto Games Over
Too bad that the new law will gain full force only after a year since President Jaein Moon puts a sing on it. By September 2020, however, all the exchanges and other services must already set up the necessary compliance structure.
A local business was waiting for more than two years for this law to see light. Simon Kim, CEO of crypto exchange in South Korea Hashed, stated:
“There has been great uncertainty regarding regulations in cryptocurrency in South Korea until now. However, with the new law, cryptocurrency has been officially classified as an asset class by the institutions and virtual asset operators can operate under proper law in Korea. I believe this is a strong, positive signal for South Korea moving forward and proving itself as the perfect testbed for blockchain and cryptocurrency on the global scene.”
Till this moment, the regulators were trying to put the industry on lawful rails. However, because of a lack of understanding, the cryptocurrency firms were self-regulated. They also held the final decisions regarding how to act with the user’s funds. Which is a dangerous situation, both for users, exchanges, and government? You never know what a shady person could gain control over billions of dollars in cryptocurrency.
In the past, and even right now, anybody could register and launch the cryptocurrency exchange in the country. The difference is if you already had a crypto business by the time the law passed, you need to file a six-month report. If the exchanges lack proper accounting models in their inner document system, then they have to shut down. If an exchange will continue operations despite the requirements, the CEO would have to pay $42,000 fine or face 5 years in prison.
Experts Claim Traders Will Lose More Money Than They Gain
Korean traders are showing different stances on forums. Some cynical persons claim that the regulation won’t stop the investors from losing money. Because, if previously they had to pay to scammers, now they have to pay taxes. And even though the exchanges will stick to real names, the traders will have to lose even more money on taxation than on occasional scams.
Also, other experts claim that the government should leave the crypto market alone. If you look at the poor performance of regulated markets, it is easy to predict what will happen to the crypto market shortly. To add more oil to the bonfire, the Binance exchange has recently issued its own KRW Stablecoin (BKRW).