South Korea’s FIU Takes Direct Control of Crypto Exchanges: A New Era of Regulation

A Shift in Regulatory Approach

On August 6th, a notable announcement came from South Korea’s Financial Intelligence Unit (FIU) indicating a pivotal change in the way cryptocurrency exchanges will be governed. Until now, the regulation was like a game of telephone – the FIU whispered guidelines to domestic banks, and, in turn, those banks passed along the message to exchanges. But let’s face it, that was about as effective as playing charades with a toddler. The FIU is stepping up its game and taking direct control.

Introducing the Licensing System

According to an official from the FIU, the South Korean government is ready to bring crypto exchanges into the regulatory fold by introducing a licensing system, as per the recommendations of the Financial Action Task Force (FATF). This move is aimed at enhancing transparency within the volatile world of cryptocurrency. Transparency, after all, is required for any legitimate business—a lesson some might still be learning (ahem, certain exchanges).

Legislation in the Works

Lee Tae-hoon, who serves as the head of administration and planning at the FIU, explained that if amendments to the Act on Reporting and Use of Certain Financial Transaction Information pass the National Assembly, the regulation will be revamped. This will align with the international standards set forth by the FATF. Lee stated,

“It will be possible to prevent money laundering through cryptocurrencies.”

Now there’s a gem of a statement! Who knew stopping crime could be so… bureaucratic?

Direct versus Indirect Regulation

With this push toward direct regulation, oversight is expected to become significantly more effective. Insiders say that the proposed changes will integrate existing rules requiring banks to provide real-name accounts to crypto exchanges. So, no more anonymous escapades—it’s time for exchanges to play by the same rules as traditional banks. If we had a dollar for every time someone evaded the law, well, we’d consider setting up a crypto exchange ourselves!

FATF Guidance: A Game Changer?

This news comes on the heels of tighter restrictions being reported on four South Korean crypto exchanges currently trying to renew their banking accounts. Following the FATF’s guidance issued in June 2019, which sought to strengthen the control over crypto exchanges to combat money laundering, these exchanges are in for a reality check. Who would’ve thought that crypto could spark such a financial regulatory renaissance?