- Revised FTRA extends AML/CFT requirements to cryptocurrency exchanges, strengthens reporting obligations and exchange eligibility
- Crypto industry welcomes the move for bringing legal recognition and clarity, but smaller exchanges may find compliance impossible. Accordingly, many could perish.
- The news has been good for crypto prices, including ICX.
South Korea’s parliament has finally passed a revision to the Financial Transactions Reporting Act (FTRA), a first step in bringing cryptocurrency into the national mainstream.
Lawmakers passed the bill during a plenary session on Thursday. It will go into effect from March 2021.
The bill extends AML/CFT obligations imposed on banks and other financial institutions to so-called “virtual asset service providers” (VASPs) such as cryptocurrency exchanges. The measure implements guidelines set by the Financial Action Task Force (FATF) last June.
There had been concern that a failure to pass the revisions could have reflected poorly on South Korea when the nation came up for its FATF mutual review later this year. Well, problem averted.
In accordance with the revised law, VASPs must now receive real-name accounts from a commercial bank and get ISMS certification. They must also report to the Financial Services Commission’s Financial Intelligence Unit (FIU). Failure to report could result in up to five years in prison or up to KRW 50 million in fines.
According to the Korean-language blockchain news outlet Token Post, the South Korean cryptocurrency industry is welcoming the development. Sure, it’s a regulation, but it also represents a starting point for institutionalizing cryptocurrency, an industry that had been wallowing in legal limbo.
And by strengthening the eligibility requirements for operating a cryptocurrency exchange, the amended law is expected to reduce investor losses to fraud and exchange bankruptcies.
On the other hand, those tougher eligibility requirements will likely shake up the cryptocurrency industry. Unable to bear the costs of coming into compliance, many small and medium-sized exchanges will be forced to close. That goes for all those exchanges operating so-called “beehive accounts” should they prove unable to obtain real-name accounts.
Receiving ISMS certification, too, is costly in terms of time and money, necessitating more than KRW 10 million in screening fees as well as security solution adoption costs and consulting fees.
Exchanges will have until September 2021 to come into compliance.
As a next step, the Financial Services Commission’s Financial Intelligence Unit will need to craft the amended law’s executive ordinance. The cryptocurrency industry believes the process of crafting that ordinance should include broad discussions to determine the scope of VASPs and conditions for receiving real-name bank accounts.
Over at News BTC, Rick Delafont welcomes South Korea’s positive — if perhaps a bit overhyped — legal changes, which have apparently pumped both Bitcoin and a certain South Korean altcoin:
“Despite (or perhaps because of) the questionable reporting on the South Korea developments, crypto prices are in the green today. Bitcoin has pumped to more than $9,100 at the time of writing – a more than four percent 24-hour gain.
The South Korea-associated ICON (ICX) has performed even better. The 24-hour low of the digital asset is currently just over $0.32.
After news of today’s favourable legislative change broke, ICX rose to just short of $0.42. It has since retraced but, at over $0.40 is still trading well above today’s low.”