New cryptocurrency rules just came into effect in South Korea
South Korean regulatory plans to tackle cryptocurrency speculation spooked investors earlier this month. But as the new rules take effect on Tuesday, participants in the market are sounding a positive note.
South Korea’s Financial Services Commission on Tuesday confirmed to CNBC that new measures outlined by the body earlier this month had been implemented, but a spokesperson said in an email that it was still too early to discuss any effects of those rules.
In a document published on Jan. 23, the regulator said it would only allow trade in cryptocurrencies from real-name bank accounts beginning Jan. 30. Those rules enabled banks to comply with their Know Your Customer (KYC) and anti-money laundering (AML) obligations, the document said.
The implementation of this new account system effectively ends “the use of anonymous bank accounts in transactions to prevent virtual coins from being used for money laundering and other illegal activities,” the FSC added in the document.
Six major banks in the country are participating in this new system so far: Shinhan Bank, Nonghyup Bank, Industrial Bank of Korea, Kookmin Bank, Hana Bank, and Gwangju Bank. CNBC elaborated: “Opening cryptocurrency accounts has been banned for weeks while the banks have installed the system, which ensures only real-name bank accounts and matching accounts at cryptocurrency exchanges for deposits and withdrawals.”
“Foreigners and underage investors are banned from opening cryptocurrency accounts in South Korea,” the publication noted, adding that “The new system also requires cryptocurrency exchanges to share users’ transaction data with banks.” Traders with existing virtual accounts will be fined if they keep depositing money into their existing accounts.
Bitcoin’s price has fallen again into $10k territory as the South Korean Government began to implement a ban on all anonymous traders in an attempt to crackdown on crypto criminal activity.
Bitcoin, Ripple and Ethereum suffered a severe crash after South Korea announced it would ban all anonymous cryptocurrency trading earlier this month.
Meanwhile, participants in the cryptocurrency space said the steps taken by South Korea were positive on a long-term basis.
“I think it’s the start of a crackdown on anonymity and the illegal use cases that some cryptocurrencies might have,” Julian Hosp, co-founder and president of cryptocurrency start-up TenX, told CNBC’s “The Rundown.”
“If, afterwards, investors and companies have more legal security working in the ecosystem, it’s going to have some short-term downsides, but long term, it’s going to have a really, really big boost,” Hosp explained.
The implementation of those new rules came after mixed messages about regulation from South Korean officials at various ministries spooked cryptocurrency markets earlier this month.
“Protocols to protect investors have been what the cryptocurrency markets have been missing and it’s what the legislation in South Korea seeks to implement,” said John Sarson, managing partner at Blockchain Momentum, which invests in cryptocurrencies and blockchain-related companies.
“It’s a good thing anytime an investment exchange knows their client and makes sure that their clients are doing things that are above board legally,” he said, adding that those rules allowed for greater scale and legitimacy.