Korea’s cryptocurrency policy drives industry into a corner

By Lee Min-hyung | Korea Times

With the Financial Services Commission (FSC) announcing a revision to a special finance information act here, concerns are resurfacing that this could hurt the vitality of Korea’s virtual currency industry.

The virtual asset industry is taking issue with the regulator’s decision allowing financial firms such as banks to independently monitor for potential risks related to cryptocurrency operators’ anti-money laundering measures. The central point is that no specific guidelines have yet to be made on how banks can monitor and evaluate potential outstanding risks of the industry players.

Under the act, cryptocurrency business owners should systematically verify real-name bank accounts issued from financial firms when making transactions with their customers. When the operators fail to receive the accounts from banks, they cannot operate the business, so their fates are determined by banks’ decision following the law revision.

Industry players were expressing concerns over the “ambiguity” of the act, saying regulators need to specify possible measures to help banks issue the accounts under an objective and convincing standard.

“Cryptocurrency exchanges that fail to secure the real-name accounts will end up closing down their businesses,” said Brian Bae, director at Blockchain Strategy Lab. “Regulators should draw up measures for more banks to actively open up the accounts for market players.”

Under the guidelines, only banks would be willing to help cryptocurrency business operators at a time when regulators do not welcome the growth of the market, according to him.

A source also said toughening regulations would hurt the industry’s growth potential. “Outlook for growth of the nation’s cryptocurrency industry will get dimmer unless regulators take more concrete steps in a way to block banks from making arbitrary decisions over whether to issue the accounts to industry players,” the source said.

The industry also raises concerns that banks will keep a low profile on the issue due to the government’s negative stance on the cryptocurrency industry here.

The government started taking notice of the cryptocurrency-related issues since 2017 when the market was still in its early stages. Korea’s leading cryptocurrency exchanges ― such as Bithumb and Upbeat ― were considered top-tier exchanges here and abroad, but they were raided by prosecutors over their lax operational control.

Banks uneasy over FSS decision

Banks are also expressing discomfort over the regulator’s decision to provide lenders with more authority and responsibility on evaluating cryptocurrency business operators’ potential anti-money laundering measures.

“The law revision will come as a setback for banks, as they have to take full responsibility for money laundering, if it actually happens, from virtual currency business operators,” an official from one of the nation’s major banks said.

Under the revision, the regulator urges banks to evaluate any potential risks from the operators, which banks argue is a move shifting regulators’ responsibility onto lenders.

“Banks have more to lose than to gain due to the act,” the official said. “Our view is that banks will spend more while evaluating their possible money-laundering risks and taking relevant measures to block such illegal activities.” But as the act will take legal effect on March 2021, the nation’s cryptocurrency industry is in a position to continue submitting complaints to the authority.

Another official from the private lender also concurred and urged the regulator to announce more detailed standards to benefit both lenders and industry players.

“Authorities need to confirm how banks can minimize risks while issuing the bank accounts,” the official said. “For now, banks have to take enormous responsibility as to the issue, so most lenders are expected to remain reluctant to join hands with companies in the industry.”

Copyright @ 2020 Korea Times

Originally published here.

 

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