Crypto: South Korea Tightens Crypto Licensing Rules For Exchanges And...

Regulators gain wider discretion to vet shareholders, finances and controls as South Korea tightens crypto market access.

South Korea’s National Assembly has approved an overhaul of the country’s crypto licensing regime, tightening entry requirements for virtual asset service providers (VASPs) and expanding scrutiny to include controlling shareholders.

On Thursday, lawmakers passed an amendment to the Act on Reporting and Using Specified Financial Transaction Information, a cornerstone of Korea’s Anti-Money Laundering (AML) framework for digital assets. The committee substitute bill was approved at a plenary session and is expected to take effect six months after the law is enacted.

The new rules widen background checks for crypto firms applying to operate in South Korea. Regulators will now vet not just company executives but also major shareholders. The list of red flags has expanded beyond financial crimes to include offenses such as drug trafficking, tax evasion, fair-trade violations, serious economic crimes and breaches of the country’s crypto user protection law.

The amendment also gives the Financial Intelligence Unit (FIU) more authority in deciding who gets licensed. The agency can now take a broader view of a company’s ability to operate, looking at its finances, internal controls, legal track record and overall credibility.

Related: South Korea’s central bank flags FX risks as lawmakers debate stablecoin issuance

Regulators will also be able to grant licenses on a conditional basis, allowing the FIU to impose requirements aimed at addressing money-laundering and user-protection risks.

Another provision closes a long-criticized loophole concerning former financial industry employees. The FIU will now be required to notify the chief executive of a business if a former employee is sanctioned for violating AML rules, with companies obliged to relay the notice to the individual and retain related records.

Implementation details and industry guidance are expected to be finalized ahead of the law’s entry into force by the FIU under the oversight of the Financial Services Commission, after approval by the National Assembly.

Related: South Korea’s Coinone weighs stake sale amid Coinbase speculation

Source: CoinTelegraph