On July 3, Representative Park Yong-Jin of the ruling Democratic Party of South Korea announced that revisions on the regulatory frameworks for cryptocurrencies including Bitcoin would be released in the upcoming months.
Three bills will be drafted and revised by South Korean lawmaker Park with the sole focus on legalizing Bitcoin and Ethereum. In the proposal obtained by local publications including The Korean Herald, Park emphasized the necessity to protect South Korean users, traders and investors from potential risks and the event of a digital currency bubble burst.
First step - revision of Electronic Financial Transactions Act
One of the first steps Park and his team will take in the process of legalizing Bitcoin and Ethereum is to revise the Electronic Financial Transactions Act, which will allow businesses and companies involving cryptocurrencies such as trading platforms and Bitcoin exchanges to retain capital of at least $436,000 and implement strict KYC and AML systems.
Such requirement will not be an issue for most South Korean Bitcoin and cryptocurrency exchanges as they are backed by some of the country’s largest billion dollar corporations and global venture capital firms.
Korbit, the second largest digital currency trading platform in South Korea which supports Bitcoin, Ethereum, Ethereum Classic and Ripple, is backed by the country’s largest $19.2 bln telecommunications company SKT and SoftBank Ventures Korea.
Bithumb, the largest Bitcoin trading platform in the country, is operated by a public company called BTC Korea. It is currently looking to raise capital through a paid-in capital increase in the South Korean stock exchange. During its peak, Bithumb processed more than $750 mln worth of Bitcoin, Ethereum, Dash, Litecoin, Ethereum Classic and Ripple, solidifying its position as the largest trading platform in the country.
No legal grounds so far
At the moment, Bithumb, Korbit and Coinone, the three largest digital currency trading platforms in South Korea that control nearly 100 percent of the South Korean Bitcoin exchange market, have no legal grounds according to Park and the Financial Supervisory Service.
Therefore, the three exchanges along with other small trading platforms in South Korea will have to be licensed and regulated by the South Korean Financial Supervisory Service, which will require the retention of capital of at least $436,000.
More to that, new KYC and AML requirements established by the government will likely not be an issue for the majority of existing business and trading platforms as most exchanges have already integrated strict KYC and AML systems upon their launch. Some platforms such as Korbit, Bithumb and Coinplug are widely known for their strict verification process to avoid potential conflict with South Korean regulations.
In an interview with The Korean Herald, law firm Minwho head attorney Kim Kyung-hwan explained that the regulation and legalization of Bitcoin and virtual currencies would ensure that both traders and businesses will operate within the legal boundary without running into conflict with existing financial regulations.
“User protection, tax evasion and money laundering have long been issues in terms of digital currency transaction. Digital currency traders have often found themselves in trouble because they are out of a legal boundary.”