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Proposed South Korean crypto law requires firms to disclose user identities

Proposed South Korean crypto law requires firms to disclose user identities
  • The FSC has proposed legal amendments to the Act on Reporting and Using Specified Financial Transaction Information.
  • The changes would require firms to report the identities of its users to financial authorities.
  • Additional changes include keeping the customers’ deposits separate from their own.

South Korea’s financial watchdog introduced a proposal of new rules to the nation’s crypto law that would require cryptocurrency firms to reveal the identities of its users.

The Financial Services Commission (FSC) has proposed changes to the Act on Reporting and Using Specified Financial Transaction Information to further prevent money laundering.

FSC proposes an amendment to the nation’s crypto law

The amendments would make it mandatory for virtual asset service providers (VASPs) to use real-name accounts in their transactions with customers. The Act defines VASPs as business entities that are involved in the purchase and sale of digital currencies and exchanges between virtual assets. VASPs also include companies acting as custodians or providing wallet services for digital assets.

The changes, if imposed, will require VASPs to operate real-name accounts in transactions with customers as well as financial institutions. Furthermore, the amendments to the crypto law would require VASPs to keep customer deposits separate from their own and also manage the transaction records of customers separately.

The Act would also make it mandatory for VASPs to have no record of fines and penalties within the last five years. Moreover, VASPs need to acquire an assessment of money laundering risks associated with VASPs by financial institutions.

Beyond cryptocurrencies

The virtual assets do not only mean cryptocurrencies but a wide range of digital services. Virtual assets include digital tokens that cannot be exchanged for fiat currency, e-money, electronically registered stocks, commodities, and more.

However, electronic bonds and prepaid cards are excluded from the scope of virtual assets.

The proposal is designed to combat money laundering by tightening security around digital assets and their users. The proposal is influenced by the Financial Action Task Force’s (FATF) recommendation of profiling crypto users to better monitor illicit activity.

The recommendation included the travel rule requiring VASPs to pass information about the sender to the beneficiary. The amendments to the crypto law are expected to be implemented by March 25, 2022.

Bilal Ahmed

Bilal Ahmed

Bilal Ahmed is a blockchain enthusiast and an avid reader who loves writing about ramifications of blockchain and cryptocurrencies. He believes in doing due diligence with facts before transmitting.

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