The South Korean government recently unveiled new guidelines for cryptocurrency exchanges to stop the local exchanges from investing in virtual currencies through foreign exchanges. According to experts, it is a decisive step taken by the financial regulators of the country for legitimizing its local virtual currency industry. Prior to that, the top financial regulator of the country told regulators of 23 other nations that the so-called Kimchi Premium has burst since anonymous crypto trading is now banned in the country.
The new regulatory guidelines unveiled recently by the Financial Services Commission (FSC) of South Korea have been introduced to add more safety to the cryptocurrency exchanges, the government claims. Such steps have become all the more necessary after multiple cyber attacks that took place last month.
What are the new crypto regulations?
FSC officials intend to monitor the domestic crypto market in a better way. And for that, they are adding more requisites to the domestic virtual currency exchanges such as know-your-customer (KYC) and anti-money laundering (AML). These wider initiatives also include increased background checks and Customer Due Diligence (CDD) guidelines. FSC believes that these initiatives will prevent foreigners from gaining access to domestic digital currency exchanges and thus will put a stop to the criminal networks laundering money, or so believes the South Korean government.
As a part of the new guidelines, the Korea Financial Intelligence Unit (KFIU) will monitor user activity and crypto transactions. At present, three major South Korean banks are facing investigation for offering bank accounts to domestic cryptocurrency exchanges. These include Hana Bank, Nonghyup, and Kookmin. However, how far the investigation has reached is not yet clear.
New framework to prevent exploitation of Kimchi Premium
According to FSC’s crypto response team, “The Government is concerned about manipulation of market conditions and injection of illegal funds while market funds are leaked into speculative investments. We view that foreigners’ and minors investments contribute to our areas of concern.” And this is where the new regulations can make a big difference. According to reports, the new framework will identify fund movements that look suspicious in and out of the cryptocurrency exchanges as well as to bank accounts connected to these exchanges.