Short Description:
South Korea tightens crypto licensing, expanding background checks to major shareholders and granting regulators new powers over exchanges.
Read Time:
2 minutes, 15 seconds
Main Article:
South Korea has passed a pivotal legislative amendment significantly tightening its crypto licensing regime. The revised Act on Reporting and Using Specified Financial Transaction Information imposes stricter entry requirements for Virtual Asset Service Providers (VASPs), directly targeting the country’s Anti-Money Laundering (AML) framework. The key shift expands regulatory scrutiny beyond a company’s executives to now include its controlling shareholders. Background checks will flag a broader range of offenses, including tax evasion, drug trafficking, and serious economic crimes, moving well beyond traditional financial misconduct.
The amendment empowers the Financial Intelligence Unit (FIU) with greater authority to assess a VASP’s overall credibility, including its financial health, internal controls, and legal track record. Crucially, regulators can now issue conditional crypto licenses, allowing the FIU to impose specific requirements to mitigate money-laundering and user-protection risks before full approval. This creates a more nuanced regulatory pathway. Furthermore, the law closes a notable loophole by mandating that businesses notify and maintain records on former employees sanctioned for AML violations.
This legislative overhaul coincides with a parallel regulatory push. The Financial Services Commission (FSC) is advocating for ownership caps on crypto exchanges, proposing limits of 15-20% for major shareholders. FSC Chair Lee Eog-weon emphasized that exchanges should be treated as critical market infrastructure, akin to securities markets, rather than ordinary private companies. These proposed governance rules, part of the broader Digital Asset Basic Act, aim to decentralize control and enhance market stability, though they face pushback from industry players. Together, these measures signal South Korea’s intent to mature its digital asset ecosystem through rigorous oversight and proactive risk management.
Short Summary:
South Korea’s new crypto law tightens VASP licensing by vetting major shareholders and granting the FIU expanded powers, including conditional approvals. Concurrently, regulators propose ownership caps for exchanges, framing them as critical infrastructure. These coordinated efforts aim to strengthen AML protocols, enhance user protection, and bring greater institutional rigor to the nation’s digital asset market.
