South Korean Regulators Want Crypto Businesses to Report Transaction Info or Face Jail Time
Establishing this law is part of the new wave of regulation in South Korea to operate crypto businesses transparently. Existing firms will have six months to comply with the rules or face strict penalties.
Financial Service Commission (FSC) amended the financial reporting rules to include the crypto industry in the state's list of operated businesses, added Korea JoongAng Daily.
The move will require exchanges, asset managers, custodial platforms, and wallet providers to submit transaction records to Financial Intelligence Unit (FIU). The government unit FIU works under the FSC to keep an eye on Korea's financial ecosystem to prevent money laundering (AML).
The new regulation will be starting on March 25, and those who didn't comply with the new rules will pay a hefty fine; $44,000 or face up to 5 years in prison.
Not only that, the commission demands virtual asset service providers (VASPs) to have a robust customer identification protocol and mark suspected transactions so that the Anti-money laundering watchdog, FIU, can further investigate.
This is the first time in the string of South Korea's laws and policies, that they have introduced stiff reporting rules related to cryptocurrency.
Likewise, the state's National Tax Service (NTS) demonstrated last week that there are more than 24,000 users that are hiding their funds to evade paying taxes.
Many exchanges in the market are already sharing their users' data to NTS; detecting hidden assets and finding the tax evaders.
To have proper taxation with the crypto ecosystem, another tax rule will come into force in January of 2022. The law will consider capital gains tax on digital assets' trading who see profits above $2,300.
In the National Assembly Seminar held in September 2020, bank representatives from South Korea showed enthusiasm about Virtual Asset Business Law and revealed this might bring them to accelerate Decentralized Finance (DeFi) plans, utilizing their banking instruments.
Banks will also have to comply with the regulation rules and fulfill the needs required for the identification process as implied by regulations. So far, one bank has launched its digital app on blockchain to provide payment and custodial services.