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South Korean Regulators Move to Tighten Rules After Exchange Hacks

In response to two major hacks this year, including the Bithumb exchange attack this week, the South Korean government has acted quickly with a new bill aimed at tightening regulations for cryptocurrency exchanges.

Choi Jong-ku, chairman of the country’s top financial regulator, the Financial Services Commissions (FSC), responded to the most recent attack on Bithumb, suggesting that the cryptocurrency system needs more stability and strengthened protection.

Korean source Newspim accuses Korean regulators of allowing cryptocurrencies to be in a “blind spot”, suggesting that a reporting system would block certain cryptocurrency crimes such as money laundering and ensure scrutiny of banks with more care, ensuring virtual accounts are more closely monitored.

According to the government, the new bill introduced in response to the more frequent attacks on South Korean exchanges and “will define a virtual currency exchange as a virtual currency handling business” with a focus on money laundering, adding:

“If the bill passes the National Assembly, a virtual currency exchange must be obliged to report to the Financial Intelligence Unit (FIU) as a virtual currency handling business and be regularly supervised by the FIU.”

Any obvious transgression of current regulations will then be immediately investigated by Financial Supervisory Service (FSS) and the FIU. The Act on Reporting and Using Specified Financial Transaction Information has already been submitted to the National Assembly in order to achieve these outcomes and tighten up government monitoring of South Korean exchanges.

Other amendments to current legislation under the proposed bill will require companies to store data for five years relating to any financial transactions conducted, and heavy fines of KRW 30 million (USD 27,000) have been suggested for illegal activity. Sanctions are also favored in response to exchanges failing to comply with the regulators, including dismissal of executive staff and suspending businesses.

Currently, in South Korea anyone with USD 30 can launch a cryptocurrency trading platform and, until these recent changes, government agencies and financial authorities have not been permitted to strictly oversee digital asset businesses, according to Yahoo.

Park Yong-kin, a National Assembly Committee member commented at the end of last year that the government shouldn’t leave exchanges unregulated as it would worsen the cryptocurrency sector. It appears that his sentiments have now filtered through to the government after the recent spate of attacks on South Korea’s exchanges.

 

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