South Korea tightens crypto licensing rules for exchanges and shareholders

[yhiaali3]

South Korea’s National Assembly has approved an overhaul of the country’s crypto licensing regime, tightening entry requirements for virtual asset service providers (VASPs) and expanding scrutiny to include controlling shareholders.

On Thursday, lawmakers passed an amendment to the Act on Reporting and Using Specified Financial Transaction Information, a cornerstone of Korea’s Anti-Money Laundering (AML) framework for digital assets. The committee substitute bill was approved at a plenary session and is expected to take effect six months after the law is enacted.

The new rules widen background checks for crypto firms applying to operate in South Korea. Regulators will now vet not just company executives but also major shareholders. The list of red flags has expanded beyond financial crimes to include offenses such as drug trafficking, tax evasion, fair-trade violations, serious economic crimes and breaches of the country’s crypto user protection law.

south-korea-tightens-crypto-licensing-rules-for-exchanges-and-shareholders

The law is expected to take effect after a six-month preparatory period following its passage.

While the South Korean government is attempting to protect consumers, it may simultaneously stifle industry with these stringent regulations. Large exchanges may be forced to restructure their ownership if shareholding limits are imposed, and the new restrictions could also deter foreign investors from investing in the Korean market.

What are your thoughts?

[Yamane_Keto]

legislation is supposed to protect investors but they also limit trading options and reduce competition, thus increasing trading fees for users. Since 2021, the number of platforms has decreased from dozens to just Upbit, Bithumb, Korbit, Coinone, and GOPAX, all of which have partnerships with Korean banks. If the new legislation is implemented, the number may decrease from 5 exchanges to two or three.

[yhiaali3]

legislation is supposed to protect investors but they also limit trading options and reduce competition, thus increasing trading fees for users. Since 2021, the number of platforms has decreased from dozens to just Upbit, Bithumb, Korbit, Coinone, and GOPAX, all of which have partnerships with Korean banks. If the new legislation is implemented, the number may decrease from 5 exchanges to two or three.

Yes, that's right. After the KuCoin and MEXC exchange apps were banned, only these exchanges that you mentioned remain, and they are all basically Korean platforms, meaning they are owned by South Korean companies.

I agree with you that the number may decrease from five platforms to only two, namely Upbit and Bithumb, which are the largest in the Korean market, with Upbit alone controlling approximately 72% of the Korean market.

[YOSHIE]

South Korea tightens crypto licensing rules for exchanges and shareholders

We know that South Korea has indeed regulated the crypto industry operating there. Currently, as far as I know, 14 crypto exchanges have been blocked for various reasons, including the KuCoin and MEXC exchanges.

Legally, we understand that every regulation that is implemented cannot be separated from compliance with the law and other reasons for money laundering and user losses are difficult to open secret in every country regarding the crypto business operating in that country's territory.

We understand that like South Korea, they are aware of the assets that are currently operating on crypto exchanges, they don't leave it alone if there are exchanges that are not registered and do not have permits, However, fines for illegal exchanges await and legal exchange taxes are certain, meaning that you comply with regulatory rules legally, the exchange is safe for the country to make a profit, that is the real point.