Bad News for Cryptocurrencies from South Korea – Strict Regulations Announced

South Korea's Financial Services Commission (FSC) Chairman Lee Yeok-won announced a comprehensive crackdown on cryptocurrency-related money laundering. This announcement marked a significant step in regulating the country's crypto industry and raised concerns among traders and investors.

Expansion of the "Travel Rule"

Speaking at the 19th Financial Intelligence Analysis Institute (FIA) event commemorating Anti-Money Laundering Day, Lee announced the expansion of the "Travel Rule." This rule requires identity verification when transferring cryptocurrency and will now apply to transactions under 1 million won (approximately $680).

Under current regulations, local exchanges collect sender and recipient information only for transfers over 1 million won. However, authorities noted that this limit can easily be exceeded for small transactions, and that money laundering is often carried out by breaking up the amount into smaller amounts. The new system aims to completely eliminate these loopholes and increase transparency in cryptocurrency transactions.

Ban on Transfers to Foreign Exchanges

Lee also announced a ban on cryptocurrency transfers to foreign exchanges that pose a high risk of money laundering. This decision is aimed at preventing South Korean citizens from directly trading with risky platforms, thereby reducing the likelihood of financial crime.

Tightening Requirements for Shareholders of Cryptocurrency Companies

The new rules will reportedly apply not only to the transaction side but also to industry executives. Individuals with criminal records related to substance use or tax evasion will be prohibited from becoming "major shareholders" of cryptocurrency companies. Furthermore, criteria such as financial standing, past financial behavior, and social creditworthiness will be more thoroughly reviewed when licensing companies.

Implementation of a Preventive Account Freezing System

South Korea's Financial Intelligence Unit (FIU) also announced the implementation of a new "preventive account freezing system." This system is aimed at preventing the smuggling of funds suspected of being linked to serious crimes abroad during investigations. Account freezing powers will be limited to serious crimes, allowing for more effective combating of financial crimes.

In Conclusion

The introduction of strict regulations in South Korea underscores the authorities' growing concern about money laundering and other financial crimes related to cryptocurrencies. These measures could have a significant impact on the market and trader behavior, making the future of the crypto industry in the country more uncertain.