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July 25, 2021

Authorities to tighten grip on unregistered overseas crypto exchanges

PUBLISHED : July 22, 2021 - 18:26

UPDATED : July 22, 2021 - 18:26

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An illustration depicts Bitcoin. (Yonhap)

South Korea‘s top financial regulator is considering disciplinary measures against overseas cryptocurrency exchanges that are not registered with the nation’s anti-money laundering body, according to the National Assembly‘s National Policy Committee on July 22.

“Business activities carried out by overseas cryptocurrency exchanges targeting local customers without reporting to the Financial Intelligence Unit -- an anti-money laundering unit under the Financial Services Commission -- are illegal under the revised Act on Reporting and Using Specified Financial Transaction Information,” the policymaking FSC said in a statement sent to the committee.

The new rule, which took effect in March with a six-month grace period, requires all virtual asset service providers to report their business status to the FIU to begin operations. To gain approval to operate, they must acquire verifiable accounts in their real names from local banks, while taking anti-money laundering measures like the launch of information security management systems.

“From Sept. 25, coin operators based outside South Korea, including Binance -- the world’s largest cryptocurrency exchange in terms of trading volume -- will be banned from serving local customers if they haven’t received authorization from financial regulators,” the FSC said.

Also, the authority is planning to warn overseas coin operators against illegal business activities by sending guidelines regarding the new regulations, officials said.

The FSC’s hard stance against overseas virtual asset providers comes after major economies, including the United Kingdom and Japan, have taken regulatory moves against Binance, ranging from a temporary suspension of operations to stricter reporting requirements, signaling a growing crackdown on the cryptocurrency market from regulators across the globe.

“If overseas cryptocurrency exchanges serve local customers with the won-currency settlement, they must register with the FIU and comply with the government’s guidelines to prevent money laundering,” FSC Chairman Eun Sung-soo told lawmakers last week.

Meanwhile, tougher control on digital asset transactions by financial regulators worldwide, coupled with fears over a fast rise of highly contagious delta variant cases, dragged down the price of a bitcoin below $30,000 on Tuesday. It traded at about $29,800 per coin, the lowest level since last month, according to market data tracker CoinMarketCap.

By Choi Jae-hee (cjh@heraldcorp.com)

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