South Korean Officials Amend Framework Surrounding Crypto Exchanges

This week has seen multiple noteworthy steps forward regarding regulation of digital assets.  First, we saw Germany recognize Bitcoin as a financial instrument, then the Supreme Court of India overturn a nationwide ban on virtual currencies.  Following their lead, South Korean officials announced the successful passing of amendments to framework surrounding digital asset exchanges.

A Unanimous Vote

The amendments made were done so with little to no fanfare.  The vote is said to have been unanimous – indicating it is the appropriate path forward.

The amendments made have a clear focus surrounding AML.  Exchanges operating within the nation will now be required to, not only register as a service provider, but provide typical AML/KYC information to banks.  This means collecting accurate user data, such as real names.

By collecting and providing this information, it is hoped that nefarious activity surrounding virtual currencies can be stemmed.

At the end of the day, while implementing these new restrictions may be a burden for exchanges, this type of structuring should lend credence to the industry.  Only the trustworthy will survive, as frauds and bad actors will be eliminated.

A Novel Purpose

While there are many use cases/purposes for cryptocurrencies, one of the more novel ones has recently come to light.

As everyone knows, the Coronavirus is wreaking havoc worldwide.  While, surely, some of the fear is due to media sensationalism, this has not stopped governments from taking proactive steps in hopes of stemming the spread.  One of these steps was the recent decision of China to quarantine and destroy cash supplies within the country.

Cash is dirty – it gets passed around umpteen times, collecting and spreading sickness to those that are exposed.  What better way to avoid this than to develop some kind of virtual currency that does not have a physical form capable of spreading disease….perhaps something like Bitcoin?

While not on the same scale as China, South Korea has found themselves a growing hotspot for the Coronavirus, as they are one of the world’s largest shipping hubs.  Although a novel reasoning for the use of virtual currencies, a nation like South Korea could potentially benefit from their use.  By establishing the aforementioned framework, and fostering growth of virtual currencies, these amendments may be some of the first steps towards a truly cashless society, providing benefits not thought of in the past.

Korean Premium

What should be interesting to watch in the coming months is the effect on virtual currency popularity within South Korea.

As most know, those that are South Korean routinely pay a premium on the price of virtual currencies.  This is often related to a lack of access to exchanges situated outside of the nation.

With the recent amendments, exchanges will need to take a more structured approach to their operations; Meaning, they will need to operate in a more regulated fashion.  Will this lead to smaller exchanges shutting down? Will this newfound government acknowledgement of virtual currencies spur even more interest in the burgeoning sector?

In Other News

As aforementioned, India first made waves this week with the Supreme Court overruling a ban on virtual currencies.  We took a look at this decision, along with a need for tempering expectations.  Peruse the following article to learn more about the overruling, and what the RBI is doing to fight back.

Reserve Bank of India to Petition Supreme Court Ruling on Virtual Currencies