South Korea’s National Assembly has adopted a law on the use of private financial transaction data, with a focus on introducing a permit system for crypto platforms.
Accordingly, crypto platforms would have to report their business to the Financial Intelligence Unit (FIU), after getting “real name-confirmed accounts” from banks.
The exchanges that fail to report their business could face prison sentences of up to five years, or fines of up to 50 million won ($42,000).
The bill, to be introduced in March 2021, stipulates that licensed exchanges should to meet real-name account and ISMS security criteria, and to register their business within six months from enforcement of the law.
The Financial Supervisory Service and the FIU will also work together on improving the Anti-Money Laundering (AML) for cryptocurrencies such as Bitcoin, while taking into account the Financial Action Task Force’s guidelines prior to implementation of the law.
Is only the strong going survive?
So far, some major exchanges such as Upbit and Coinwon have used real-name accounts. However, some others allegedly relied on honeycomb accounts, through which they obtained investor money to support consumer purchases with their own corporate accounts.
Since the requirements for banks to offer real-name accounts become stringent, small exchanges using honeycomb accounts will either be forced to comply with or leave the industry.
S. Korea Mulls 20% Crypto Tax
South Korea’s government is considering a proposal to levy a 20 percent tax on cryptocurrency transactions.
The Ministry of Finance has ordered its income department to review the draft law.
The gains made through cryptocurrency transactions are expected to be reclassified as ‘other income’ and not ‘capital gains’.
Cryptocurrency regulations were developed significantly since the National Policy Committee has unveiled the cryptocurrency taxation policy in 2017.
Under the proposed law, a 20 percent tax will be levied on 40 percent of the total other income, while the remaining 60 percent will not be subject to tax.