The Financial Services Commission (FSC) of South Korea hinted that it may loosen constraints on foreign investors trading crypto on local exchanges if their AML capabilities advance.
The head of research at Presto, Peter Chung, asserted that opening the local market to foreign investors will stimulate the South Korean cryptocurrency industry and increase the USD stablecoin market.
Odds that foreign investors will be able to access Korea’s domestic crypto market are rising steadily
Foreign investors are prohibited from trading on South Korean cryptocurrency exchanges due to local regulations that demand stricter Know-Your-Customer (KYC) standards from service providers. For instance, the KYC set demanded local exchange users use local bank accounts registered in their true names to trade cash for cryptocurrency.
Following these regulations, Peter Chung said Korea had imposed capital account restrictions to gain authority over portfolio investments. He acknowledged that granting foreigners the ability to trade cryptocurrency on Korean exchanges would reduce the effects of these limitations.
Meanwhile, according to local news outlet Bloter, the head of the Financial Services Commission’s virtual asset division, Kim Sung-jin, stated that he agreed that foreign investors should be allowed to access the domestic cryptocurrency market during a seminar at the National Assembly.
Kim also mentioned that the commission would investigate strategies to attract international investors to the domestic market. The current situation might be revised if exchanges comply with the required AML capabilities.
South Korea embraces cryptocurrency innovation following the U.S. lead
Notably, as the U.S. administration under President Trump leads the world in crypto innovation, South Korea seems to be reassessing its long-standing capital controls to keep pace.
In support of cryptocurrency innovation in South Korea, Chung asserted that the potential opening of the local cryptocurrency market in South Korea could boost the country’s cryptocurrency industry and encourage the USD stablecoin market to grow even more.
Furthermore, the Kimchi Premium, or the gap between how much local exchanges charge on cryptocurrency and other exchanges, would also be wiped out as global liquidity was barred from the market.
Chung also noted that the most recent comments that the FSC official made suggested that South Korean regulators believed they could not leave AML responsibilities to local exchanges.
In March 2022, the FSC put the Travel Rule as an AML safeguarding measure prior to KYC imposition and the drafting of the country’s first-ever crypto legal framework. According to the rule, exchanges needed to collect and hold personal information of the sending and receiving parties for cryptocurrency transactions that surpassed one million won (approximately 678.31 USD) in line with the recommendation of the Financial Action Task Force.
Korea now embraces the Travel Rule, and the major exchanges in Korea recently announced that the Travel Rule would cover transactions below this threshold.
Furthermore, South Korea has vowed to take action against entities that violate these regulations. For instance, the Korea Financial Intelligence Unit fined one of the biggest cryptocurrency markets globally, Upbit, widely known as altcoin-heavy, which had a monthly trading volume exceeding $85 billion in March earlier this year. The platform allegedly facilitates transactions with dozens of unregistered foreign exchanges.
Still, the penalty has not taken effect after a Seoul court granted Upbit’s injunction.
