South Korean financial authorities in cooperation with Korea Financial Intelligence Unit (KFIU) created a task force to oversee cryptocurrency exchanges and to ensure cryptocurrency businesses are compliant with existing regulations, authorities announced on Jan. 25. It will collaborate with local cryptocurrency exchanges to ensure that money laundering and fraudulent activities using cryptocurrencies do not occur in the local market, according to KFIU.
Local financial authorities will also require six major South Korean banks that have decided to support cryptocurrency exchanges to report to KFIU if suspicious activities are unraveled. Local banks including Shinhan Bank, Nonghyup, IKB, Woori Bank are expected to file regular reports to the KFIU on suspicious trading and prevent financial crimes.
Stricter regulations, optimistic
After officially refuting the Justice Ministry’s cryptocurrency trading ban proposal, the South Korean government has allocated significant resources to regulate the local cryptocurrency market and provide a more stable and robust infrastructure to investors within the market.
For many weeks, the majority of South Korean investors in both the traditional finance sector and cryptocurrency market have been outraged by insider trading initiated by government officials working for the South Korea Financial Services Commission.
Last week, Choi Heung Sik, director of the FSC, admitted that employees of the agency sold Bitcoin immediately before the false cryptocurrency trading ban announcement of the country’s Justice Minister Park Sang-ki and bought Bitcoin after the announcement.
At the time, Hong Nam-ki, head of the state coordination division, said:
The government is currently investigating into the several government officials that were alleged to have initiated insider trading. Given that it is not appropriate for a government official to trade cryptocurrencies, the agency will encourage its employees to prevent from trading cryptocurrencies in the short-term.”
In the aftermath of the South Korean cryptocurrency trading ban fiasco, the approval rating of President Moon Jae-in hit an all-time low below 60 percent, and the government was heavily criticized for negligence.
Starting this week, to counterbalance the mishandling of the false cryptocurrency trading ban by the Justice Ministry, the South Korean government and financial authorities have begun to regulate the local cryptocurrency market and businesses strictly. Previously, the South Korean government was hesitant towards regulating cryptocurrency businesses because it feared the South Korean people would consider it as an endorsement of the market.
Regulation is beneficial to local investors
Up until last week, South Korean investors feared that banks would cut money flow into the market by disabling bank accounts, as the Justice Minister claimed in his controversial premature statement about the cryptocurrency market.
Concerns of local investors only intensified when Kookmin Bank announced the closure of virtual bank accounts deployed on cryptocurrency exchanges.
However, since then, six major South Korean banks have provided support to local exchanges, KFIU has started to regulate the market and the government has begun to consider cryptocurrency businesses as legitimate financial service providers.