Short Description
South Korea tightens crypto licensing, vetting major shareholders. New rules grant regulators conditional approval powers and propose exchange ownership caps.
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3 minutes, 15 seconds
Main Article
South Korea has enacted a significant crypto licensing overhaul, introducing stricter entry requirements for Virtual Asset Service Providers (VASPs). The National Assembly approved amendments to the country’s anti-money laundering (AML) framework, marking a pivotal shift towards a more rigorous regulatory environment. A key change expands background checks beyond company executives to include controlling shareholders, scrutinizing them for a wider range of offenses like tax evasion, drug trafficking, and serious economic crimes. This move aims to bolster market integrity by ensuring those with significant influence over crypto platforms meet high standards of credibility.
The reform significantly empowers South Korea’s Financial Intelligence Unit (FIU). The agency now has broader discretion to assess a VASP’s operational fitness, evaluating financial health, internal controls, and legal history. Crucially, the FIU can now issue conditional licenses, allowing regulators to impose specific mandates to mitigate money-laundering and user-protection risks before granting full operational status. Furthermore, the amendment closes a notable loophole by requiring firms to be formally notified and take action when former employees are sanctioned for AML violations, enhancing accountability across the industry.
Looking ahead, South Korean regulators are signaling even tighter governance with potential ownership caps for crypto exchanges. Financial Services Commission Chair Lee Eog-weon has advocated treating exchanges as critical market infrastructure, similar to securities markets, and supports proposals to limit a major shareholder’s stake to 15-20%. This aligns with the broader goals of the forthcoming Digital Asset Basic Act and aims to prevent excessive control and potential conflicts of interest, though it has faced pushback from industry players.
Short Summary
South Korea’s new crypto regulations strengthen the licensing regime by vetting controlling shareholders and granting the FIU conditional licensing authority. These changes, alongside proposed ownership caps for exchanges, aim to enhance market integrity, consumer protection, and AML compliance, firmly integrating the digital asset sector into the nation’s formal financial oversight framework.
