In an effort to protect investors, monitor money laundering activities and illicit transactions, the South Korean government have proposed a new set of rules for cryptocurrency exchanges operating in the country, according to a recent report by a local media outlet.
The government introduced a “Travel Solutions Rule” that will ban withdrawals for cryptocurrency exchanges not KYC licensed.
Speaking on the rule, the government noted that the move will only enable transfers to be possible between licensed exchanges in the future.
“In the future, when exchanges transmit virtual assets such as Bitcoin or Ethereum, ‘who sent and who received’ records are kept. Transfers will only be possible between ‘licensed exchanges’,” the government said.
Per the report, the new travel rule solution was developed as a joint venture between the three top crypto exchanges in South Korea, Bithumb, Korbit, and Coinone.
The solution, dubbed “Code”, is reportedly the first travel rule solution built with blockchain. It is also compliant with international anti-money laundering (AML) rules.
“It is effective in preventing tax evasion and money laundering because transaction records are kept. This is because Sewon is exposed naturally and records of money (virtual assets) are left behind. In particular, such data can be provided at any time upon request by the authorities, which is expected to significantly change the investment environment,” the report added.
The new travel rule solution, which is scheduled to take effect by March 25, 2022, entails that all crypto exchanges that wish to continue operating in the country must be KYC licensed before the given date with no extension.
Following the report, only a few exchanges in the country are KYC licensed per the Special Provisions Act with fourteen exchanges yet to be licensed under the new rule.
Failure to comply with the new rule, crypto exchanges may be subject to sanctions up to a maximum business suspension.
South Korea’s Financial Watchdog to Tax Crypto Profits
The South Korean government is not wasting much time in regulating the crypto space as it continues to introduce tough regulatory frameworks.
Back in 2019, with the government viewing digital assets profits as being related to stock, it revealed plans to impose a 20% cryptocurrency tax bill.
With the tax on cryptocurrency profits reported to be implemented in the following year, 2020, it did not go as planned due to several reasons.
However, there have been recent reports that the bill is to be implemented by next year.
Meanwhile, just last month, Coinfomania reported that South Korea’s Financial Services Commission (FSC) is planning to tax non-fungible tokens (NFTs) profits.
