A top South Korean financial agency, Financial Services Commission (FSC), has released a set of reviewed cryptocurrency regulatory guidelines and framework on know your customer (KYC) and anti-money laundry (AML) requirements, according to a press release that was published this week. The country’s cryptocurrency market is one of the largest in the world, and as such, any regulatory decision made by its financial authorities would have a direct impact on the global cryptocurrency market as well.
The press release indicates that the South Korean Financial Services Commission (FSC) carried out on-site assessments on three local banks in the country named Hana, Nonghyup, and Kookmin Bank. The assessed banks have been known to render banking services and digital accounts crypto exchange companies in the nation. The results obtained from these inspections prompted the update to AML and KYC guidelines.
According to the new supervisory guidelines released by FSC, digital currency exchanges will be required to carry out an extensive Customer Due Diligence (CDD) and Enhanced Customer Identification (EDD) on new and existing users. FSC also ordered exchanges to conduct adequate background checks for all transactions on their platforms. These customer verification steps would ensure that foreigners are restricted from using local cryptocurrency exchange platforms to purchase and sell digital assets. The customer Identification process would prevent illegal exchange transactions and payment processing as well as restrict Criminals from secretly using personal accounts of other people to launder money out of South Korea. If an individual or a business fail to provide information for customer verification, the new guidelines direct that every transaction from such party must be terminated and rejected.
Effects of Regulatory Guidelines on the South Korean Cryptocurrency Market
The South Korean Financial Supervisory Service (FSS) had previously banned initial coin offerings (ICOs) and privacy trading of digital currencies in the country, in September 2017 and January 2018 respectively. Later in May 2018, the FSC joined a cryptocurrency probe which was initiated by the country’s Financial Supervisory Service (FSS) into Anti-Money Laundering (AML) compliance with crypto exchanges. According to the General Coordinator of Workchain Centers, Luis Manuel López:
“South Korea is the third largest cryptographic market in the world, which means that any regulatory decision in the country has a negative or positive impact on the world market. Rumors of new regulatory bans in January 2018 had a negative impact on the cryptocurrency market leading to a 40% drop in total market capitalization in a single day, that has been called the “Black Tuesday.” Because speculation has an important role in the crypto market, any change in the law or just rumors of the South Korean government will generate fluctuations and large swings in the prices of the value of digital money around the world.”