South Korea’s National Assembly’s policy committee passed a bill on Tuesday, adding new amendments to the Act on Reporting and Using Specified Financial Transaction Information that will create a groundwork for digital currencies by classifying them as virtual assets.
One of Korea’s financial regulator, the Financial Services Commission (FSC), claims that the recent additions to the Act can help make digital currencies more transparent and validate investment opportunities in cryptocurrency across the country.
The FSC further added that the new law will include a list of requirements for digital asset businesses and cryptocurrency firms in order to prevent illicit activities such as money laundering and create a set of basic rules for electronic financial transactions. According to the new amendment, all businesses involved in digital currency will be obligated to register their companies as virtual asset businesses and report accordingly with the Financial Service Commission’s Financial Intelligence Unit.
Digital currency businesses that do not report their companies will not be able to obtain an Information Security Management System certified document from South Korea’s national Internet and Security Agency. It also adds that the business operations taking place under false documentation or incorrect information of bank accounts through false identity will not receive an approval to carry on.
More consequences will take place if digital currency businesses do not create their own systems to clear out errors that fail to meet criteria of the Financial Action Task Force (FATF), an intergovernmental organization that was established by the G20 to create policies to counter illicit activities such as money laundering.
Once the bill gets approved from the lawmakers after it is passed by the judiciary committee on the main floor of the National Assembly of South Korea, it will effectively be adapted next year. It will impose regulations on digital currency exchanges and service providers as there are multiple cryptocurrency related bills at National Assembly, with undecided and pending fates.
Furthermore, Financial Service Commissions detailed that the bill also demands digital asset businesses to take action and set standards for financial transactions, on Wednesday.
Previously, the Financial Intelligence Unit regulated cryptocurrency exchanges indirectly through administrative directions to the banks of the country, violations of reporting obligations can result in imprisonment of up to five years or receive a penalty of almost 50 million won, which is approximately $42,500. The new bill is seen as one step closer for cryptocurrency to become legitimate in South Korea.