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Bitcoin Regulation and Bitcoin Tax in South Korea
Breaking News, Choe Heung-sik, South Korea’s Financial Supervisory Service (FSS) chief has just announced that the government would support cryptocurrency trading. According to recent reports the government has declared it would support the cryptocurrency industry to develop in the country. The official specifically said the government would support “normal transactions” of cryptocurrencies after the government moved to reduce anonymous accounts trading in crypto markets in late January. He said, “The government will support [cryptocurrency trading] if normal transactions are made and will encourage the growth of the industry under know-your-customer (KYC) transparency.”
South Korea is one of the busiest places when it comes to bitcoin and other crypto currencies. The volume of bitcoin and number of transactions plays a significant part in the financial world of S. Korea. However the S. Korean government are applying pressure to the 6 big banks in S. Korea having stated they will fine cryptocurrency traders in the country if they refuse to convert virtual accounts into real named accounts.
In a move to curb anonymous trading in crypto currencies the FSC has announced that from the 30th of January 2018 that only crypto currency trading will be allowed through real name bank accounts linked to crypto currency exchanges and has issued a ‘guideline’ to prevent crypto currency related money laundering. Called ‘Cryptocurrency-related AML Guideline’, it is part of the government-wide effort to curb cryptocurrency speculation and prevent cryptocurrencies from being exploited for illegal activities. Banks will switch to the Real Name Policy in Cryptocurrency Transactions starting from January 30 that only cryptocurrency trading through real-name bank accounts linked to cryptocurrency exchanges can be done.
“People who have traded virtual currency have been told that if they refuse to check their real name, they will be penalized for depositing into an existing account,” the Kyunghyang Shinmun stated.” Only withdrawals will be allowed from existing virtual accounts.”
S. Korea’s Financial Intelligence unit (The KoFIU) as well as the Financial Supervisory Service (FSS) completed inspection of bank accounts used by crypto currency exchanges in S. Korea. Banks including the six largest banks, Woori Bank, Kookmin Bank, Shinhan Bank, NongHyup Bank, Industrial Bank of Korea and Korea Development Bank. The last two being government run banks. S. Koreans will, in all likelihood, simply go offshore to trade and current restrictions will probably not prevent the small amount of money laundering in crypto currencies (compared to the vast amount transacted through major banks) in the slightest as that would simply go back to using fiat currency instead.
They have been checking 111 specific accounts relating to crypto currency exchanges with around 2 trillion Won (about $1.8 billion US) combined. ‘Each account is presumed to have generated up to millions of virtual accounts’, an excerpt from the report added.
This is being correlated with curbing fait money flowing into exchanges and exchanges using loop holes in existing regulations. The Korean government is instituting a ban on all anonymous trading of cryptocurrencies using an attempt to crackdown on money laundering and financial fraud as an excuse. “We will…resolutely respond to such crimes by slapping maximum sentences possible on offenders,” the government stated in December and added, “authorities would leave all policy options open, including closure of a cryptocurrency exchange when deemed necessary.”
The new rules only allow trading for investors with matching account names at their banks and cryptocurrency exchanges and a complete ban on anonymous ‘virtual accounts’, to comply with ‘knows your customer’ policy, will commence on January 20, 2018.
As part of establishing tighter controls the Financial Services Commission is also encouraging closet cooperation with peer agencies in Japan and China. Ther Deputy Finance Ministers of all three countries have been exchanging ideas to set up a detailed system of cooperation between the nations.
FSC’s chairman Choi Jong-ku, during a press conference, encapsulated the banking fraternities stance on crypto currencies saying that Seoul would like to “set up a detailed system of cooperation” with Beijing and Tokyo, He warned against what he called an “irrational trend” of investing in cryptocurrencies, call it an “ongoing fever of speculative investment.” Choi’s seems to think that cryptocurrencies are unable to play a role as a means of payment. “Virtual currency only triggers side effects”, the regulator stated and read out a long generalised list of Fraud, illegal fundraising, hacking, speculation and manipulation of market prices. Of concern the government official left the door open to shutting down all cryptocurrency-linked businesses to ‘minimize the aforementioned effects’, reported in the Korean Herald. Choi Jong-ku said the world was facing a “policy challenge pandemic” and added that Korea’s “trial-and-error” experience can help shape trilateral efforts to implement regulations and a system to end anonymous trading and enforce real name identity verification on traders will be implemented by the end of January. The head of the FSC then issued a warning, “Virtual currency transactions are highly susceptible to money laundering because of their anonymity,” he said.
This article will continue to be updated as further news comes to hand.
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