South Korea’s crypto community could soon face stringent reporting requirements on all cryptocurrency transactions, with the country’s National Assembly debating whether “know-the-sender” (KTS) rules should be imposed.
Arguments against the proposed KTS rule were heard before the Political Affairs Committee of South Korea’s legislature on Tuesday, with lawmakers and industry experts pushing back against the proposed legislation.
If written into law, the KTS rule would stipulate that businesses that receive any crypto assets must verify and report the name of the issuer and their location. In the case of business-to-business transactions, the issuer’s legal status and the number of persons that they employ must also be reported.
Choi Hwa-in of the Financial Supervisory Service (FSS) warned that the local blockchain industry could become “severely limited” should the proposal pass. Attorney Yoon Jong-soo later pointed out that as cryptocurrency becomes more popular and widely adopted, it will become harder to assume that the sender will provide the necessary information to identify themselves.
The KTS rule would also mandate that crypto senders from outside of Korea register with the Financial Services Commission (FSC), the country’s financial regulator. These rules could spark an initial shutdown of all crypto transactions in the country until relevant parties could come into compliance, although a grace period would likely be introduced alongside the legislation.
The rule was proposed via a series of bills by Kim Byung-wook of the majority Democratic Party and Yoon Chang-hyeon of the People’s Power Party on Oct. 28.
The hearing in the National Assembly on Tuesday follows a long stretch of regulatory discussions concerning cryptocurrency for Korea's lawmakers this year.
Whether a tax on cryptocurrency earnings will be enacted as planned from January 2022 for South Korean residents is not yet certain. Several lawmakers have proposed delays to the tax while facing staunch opposition from Finance Minister Hong Nam-ki.