South Korea Makes Advances in Cryptocurrency Regulation

On June 8, the South Korean Policy Advisory Council met to develop a regulatory framework for national cryptocurrency exchanges.

With the intention to develop new policies for traditional financial institutions, the Korean Financial Intelligence Unit added cryptocurrency exchanges to the discussion in an effort to find new ways of regulating the nascent markets.

After the $33 million hack of Korean cryptocurrency exchange, Coinrail, the South Korean government is taking steps towards implementing new KYC and AML policies for financial institutions.

Currently, the Korean Free Trade Commission does not have authority to access or monitor cryptocurrency exchanges and their customers.

Cryptocurrency exchanges in South Korea only need to obtain a $40 communication vendor license to legally run and operate.

In a leap forward for cryptocurrency legitimization, the KFIU recognized cryptocurrency exchanges as large-scale financial institutions - subject to the equivalent scrutiny as that of commercial banks and stock markets.

"We are frustrated as well. We fully understand that the government is reluctant towards regulating the cryptocurrency market because it will inevitably lead investors to consider it as the government's way of legitimizing the market. But, if the government leaves the cryptocurrency market unregulated, it is simply leaving it vulnerable to various issues."

With the cryptocurrency and blockchain industries quickly coming into the global mainstream, the need for regulation becomes more relevant and pressing as an anchor for transparency in the space.

Institutional investment firms, such as Goldman Sachs and the Intercontinental Exchange, are gradually adopting cryptocurrency as a new asset class.

With new regulations coming into place, Korea is one of the first countries to take steps towards bringing cryptocurrency markets out of the shadows and into the public light.