Critics have accused Seoul of “over-regulation,” claiming that a new South Korean crypto law – which will promulgate in a matter of weeks – could marginalize the industry.
Per a report from EBN, voices of concern are growing louder within the crypto sector, with some business experts claiming that the cost of compliance will all but freeze out startups, and provide no room for conventional financial institutions to enter the space.
A pro-business MP also added that the new laws placed heavy regulations on crypto exchanges, but still failed to provide a “legal definition of what digital assets are” in the new law, and added that “there are no standards or definitions for the blockchain industry” in the forthcoming regulations.
The rules will require all Virtual Asset Service Providers (VASPs) in the country to obtain information protection management system (ISMS) certification, adopt international-standard anti-money laundering systems and engage in a real-name verification for banking and satisfy banks’ risk assessment checks. They must also cease sharing order books with overseas partners. Only after that, can VASPs continue doing business, although they will need to report their actions to the regulatory Financial Intelligence Unit.
And all the above kicks off from March, although a six-month grace period has also been extended for companies who are serious about compliance.
As previously reported, this has led some experts, such as the head of exchange Bithumb Korea, to suggest that there will only be four or “at most” seven trading platforms left standing in the country within the space of a few months – down from some two dozen or more that currently operate. Binance has already announced the closure of its own South Korean operations.
The media outlet quoted a joint report on the law compiled by blockchain firms Hashed and Hexland, which concluded that the regulations required banks to make “subjective judgment” in risk assessment tests, instead of “providing clear standards.”
And the same outlet also quotes an unnamed industry insider as stating that the rules allow no space for “self-regulation,” which would have been preferable in what is clearly an emerging sector with as-yet-incomprehensible scope for expansion.
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