On March 10, major South Korean cryptocurrency exchange Bithumb announced it has partnered with crypto forensics firm Chainanylsis following the passing of new Korean crypto regulations.
Bithumb will employ Chainalysis’s “Reactor” investigations tool to examine suspicious activity on its platform in a bid to comply with Korea’s recently amended Special Financial Transactions Information Act.
South Korean crypto exchanges must comply with new regulations by 2021
Certain provisions in the act will take 12 months to come into effect, with the new apparatus expected to be fully implemented after a further six months. As such, all South Korean crypto exchanges must operate with full compliance by September 2021.
Bithumb’s head of compliance, Sungmi Lee, predicts lawmakers to further strengthen the new legislative apparatus in the near future, stating, "We anticipate further updates following last week's vote making it even more important for us to have support available in our local language."
Non-compliant exchanges face up to five years in prison
On March 5, South Korea’s National Assembly passed the revised bill, introducing a permit system for the nation's virtual asset service providers (VASPs).
Korean exchanges must now report their operations to the country’s Financial Intelligence Unit, and are required to collect “real name-confirmed accounts” from banks. Reporting failures can be penalized with up to five years in prison or $42,000 worth of fines.
Exchanges must also have their systems certified by the Korean Internet Security Agency (KISA). Due to the time and expense involved in attaining KISA certification, only four VASPs have completed the process so far — Bithumb, Upbit, Coinwon and Korbit.
Chainalysis’ chief revenue officer, Jason Bonds, stated, "As cryptocurrency use in South Korea continues to grow, new regulations such as this will make blockchain analysis solutions like Chainalysis vital for compliance.”
FATF directives take effect worldwide
South Korea is one of many nations to recently amend their domestic cryptocurrency regulations to meet the reporting and compliance standards recently laid out by the G7’s Financial Action Task Force (FATF).