Concerns Over Money Laundering
In order to prevent residents from using credit cards to make purchases of cryptocurrencies, the Financial Services Commission (FSC) of South Korea is considering making modifications to the regulations governing credit finance. By preventing South Koreans from purchasing digital assets from overseas exchanges, this plan seeks to avert problems such as the unlawful outflow of funds and the laundering of money.
This decision comes at a time when the FSC has highlighted concerns regarding the hazards associated with card payments on offshore virtual asset platforms. Beyond facilitating money laundering and the promotion of high-risk financial activities, the regulator’s concerns encompass several issues, including the unlawful movement of local funds abroad.
The South Korean financial regulator presented this proposal in the form of a legislative notice, indicating a proactive approach to addressing the evolving difficulties in the current cryptocurrency ecosystem.
Per existing regulations, domestic cryptocurrency exchanges primarily permit virtual asset transactions by means of verified deposit and withdrawal accounts. This ensures that the user’s means of identification is adequately validated.
However, the local media agency Yonhap claimed that these standards governing identification verification do not apply to international crypto exchanges. As a result of this disparity in regulatory control, there is a striking contrast between the measures that are imposed on local exchanges and those that are applied to their competitors in other countries.
While domestic platforms comply with these strict identity verification protocols for transactions, foreign cryptocurrency exchanges aren’t liable to such regulatory scrutiny, resulting in gaps in monitoring and oversight responsibilities. Thus, there are concerns about the effectiveness of the procedures in place to ensure a level playing field, including security guarantees for all crypto service providers, whether local or international.
The absence of strong identification verification procedures on international exchanges could present difficulties in detecting and controlling illegal activities.
Calls For Public Comments
Meanwhile, South Korea’s top regulator has issued an open call for comments on the proposed modifications to collect feedback from the general public. In the course of this public consultation session, which will continue until February 13, stakeholders and individuals can share their opinions and insights.
Following the deadline for the public comments, the regulator will comprehensively assess these inputs and issue its resolution afterward. Thus, it can revise the current policies to suit the participants in this industry and accordance with the regulatory objectives.
The regulator still has the objective of including a wide variety of perspectives and factors in the measures it has already presented. Furthermore, the regulatory body aims to implement the changes during the first half of the year.