April 9, 2018
In recent times, blockchain has increasingly proven its potential in all areas. Typical is the introduction of cryptocurrency such as bitcoin, ethereum, ripple, etc. The whole world views the influence of all these currencies, but each country has different views and their own blockchain regulation. As one of the most high-tech countries in the world, Korea is developing and implementing blockchain technology at an incredible pace, meaning its regulators have to speed up in order to stay up to date with this global trend.
Korea has set up a special force to research and develop policies for the management of the cryptocurrency market. A spokesman for the force said that Korea may follow a blockchain regulatory roadmap similar to the United States and Japan, which allows for cryptocurrency-related activities within the framework of management. (1)
Korea, despite being known as one of the world’s largest cryptocurrency trading countries, is facing a lot of legal hurdles. According to the documents, financial institutions will have to comply with some strict rules to ensure that they can not abuse the potential of this market and minimize the risk of money laundering.
“EDD requires banks to verify the additional information of the cryptocurrency trading: the purpose of the financial transaction and the source of funds; details of the services provided by these exchanges; whether the trading floors are using real accounts or not; and whether they conduct user identity processes (KYC).” (2) Finally, the government stipulates that banks and financial institutions must share information about any suspicious activity originating from both users and the exchange, to avoid any problems derived due to the lack of transparency in the market.
Another source said that they thought the ICO ban would only be lifted if Korea amended the legal framework for the crypto business. This requires a strict blockchain regulation.
ICOs are used by startups to raise funds through pre-coding that is based on blockchain technology. In Korea, some startups use ICO because it requires less legal documentation, which allows the company to raise capital directly from investors rather than depending on the bank. When the ICO ban was issued, local entrepreneurs who had previously planned to raise capital said they would carry out the project overseas without permission to operate in the country.
An ongoing trend is that the number of investors interested in ICO is increasing. In addition, with greater transparency, more and more participants can make better investment decisions before pouring money into the ICO. Some analysts say this is the reason companies are getting bigger investments in a shorter period of time if blockchain regulation is passed.
Kang Young – soo, who oversees the pre-coded business policy at the Financial Services Commission (FSC), said Korea had no plans to control crypto and blockchain, but it was only finding a way to manage the market.
Yeon has confirmed that the Ministry of Finance’s blockchain regulation has no plans to prohibit or restrict domestic cryptocurrency. (3) He said: “Blockchain technology is an important breakthrough to promote the fourth industrial revolution. The ministry will therefore take a cautious approach in regulating the cryptocurrency market. For illegal uses of cryptocurrency, the ministry will impose stricter blockchain regulations.”
Nevertheless, the country has recently appeared to be softening its stance on cryptocurrency trading. “The government will support cryptocurrency trading if normal transactions are made,” said Choe Heung-sik, governor of the Financial Supervisory Service. Choe also mentioned that the government would encourage more cryptocurrency exchanges in the banks.
After the news broke that South Korea may ban or suppress cryptocurrency exchanges, costs of digital forms of money consisting of bitcoin decreased significantly during the period of mid-January. In light of that, the nation’s finance minister has timely reacted to calm the heated cryptocurrency market, stating that managing crypto exchanges was the government’s immediate tasks, though he to calm the markets was to state that focusing on that controlling trades is the administration’s “quick errand,” however he didn’t confirm to eliminate the future ban.
South Korea has since uncovered that it is taking into consideration the adoption of a framework similar to New York’s “BitLicense” for the control of cryptocurrency trading. An administration official involved with a virtual cash force stated on Feb. 13: (4) “We are emphatically considering the adoption of a trade endorsement framework as the extra direction on digital forms of money. We are most likely benchmark the model of the State of New York that gives a specific consent [for trade operations].”
Infinity Blockchain Labs (IBL) is a visionary R&D company engaged in intermediary and RegTech services employing blockchain technology. We focus on forming alliances with established businesses and regulatory institutions across various industries, as well as providing collaborative incubation for early stage blockchain projects.
We aspire to empower Vietnam to become a global leader in blockchain. We keep a close eye on blockchain use in other countries to fully understand the technology and learn how to best foster its development and adoption in Vietnam. IBL is working and sharing experiences with regulators in Vietnam and throughout the world about blockchain applications. We strive to keep our readers up to date on the latest movements such as blockchain regulation so as to have a full and complete understanding for compliant use and development. We believe Korea serves as a good way in which blockchain can be nurtured.
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