South Korea’s national parliament passed a new law on March 5 that comprehensively covers the regulation of the crypto industry in the country. The law was passed unanimously in a special session that took place amidst the battle against coronavirus in the country.
South Korea Cryptocurrency Regulation
With the new law passed, financial regulators in the country will now have the authority to oversee activities in the nation’s crypto sector. They will now be able to create rules about AML, KYC, and other aspects such as taxation.
Details of the New Law
According to a local media report, the law will need to be signed by the president for it to be enacted. This enactment process will last for a year from the date of signing. After that, those operating in the nation’s crypto sector will have a six-month grace period to align their activities with the law. This means that the law will come into full effect around Q3 2021.
This law was passed after nearly two years of debate and attempt by regulators to issue guidelines. However, the law did not back their guidelines. Up to now, the Korean crypto sector has mainly been self-regulating. However, this has caused conflicts with regulators in some instances.
According to the new law, wallet firms, exchanges, trusts, and ICOs will need to offer real-name verification and they must do this in partnership with a licensed bank. With real-name verification, individuals can be traced to their bank account when they make withdrawals or deposits in fiat currency. Besides that, all firms in the crypto sector will have to receive certification known as the Information Security Management System (ISMS).
Some of the exchanges already offer real-name verification, following guidelines issued by the financial watchdog in the country. The ISMS certification is issued by the Korea Internet Security Agency. The certification can be expensive but all firms in the crypto sector will have to obtain it.
South Korea’s Crypto Sector
The crypto sector in South Korea has been booming for a while now. Despite having a small population of the world, it accounts for some of the largest BTC trading volumes globally. For instance, a 2017 study showed that about a third of all working-class citizens have invested in crypto. The nation’s capital Seoul even attempted to launch a cryptocurrency that was called the S-coin. At the time, regulators move to issue harsh guidelines to try to stifle the sector. This caused huge price movements in BTC prices.
The passing of today’s crypto regulation is a victory for the nation’s startup industry. It shows that the government now has a better understanding of the crypto industry. Instead of trying to ban the sector, it has opted to regulate the sector and align it with laws governing the fiat financial industry. It will offer a huge boost for startups working on blockchain and crypto solutions. One of the largest tech firms in the nation, Kakao, is already quite active in the crypto and blockchain sector. This new law will no doubt encourage more tech firms to invest in the sector.
As mentioned in a market report yesterday, Bitcoin was starting to show signs of reversing sentiment. Bitcoin price had been following traditional markets to the downside, but started acting in an inverse matter yesterday. As discussed, the catalyst could have been this news out of South Korea. With cryptocurrency use cases and interest ramping up in South Korea, this movement could have a positive outcome long term.
Image Source: Pixabay