Editor's Note: This article comes fromNakamoto Shallot (ID: xcongapp), Odaily is authorized to publish.
Editor's Note: This article comes from
Nakamoto Shallot (ID: xcongapp)
Nakamoto Shallot (ID: xcongapp)
Yesterday, the news that India’s Supreme Court overturned the central bank’s encryption ban caused some excitement in the encryption community.
And this afternoon, the plenary session of the Korean National Assembly also officially passed the amendment to the "Law on the Reporting and Utilization of Specific Financial Transaction Information" (hereinafter referred to as the Special Financial Act). This means that the amendment will be implemented one year later (that is, in March 2021). Relevant enterprises are required to report to the financial sector within six months from the date of implementation.
The amendment considers South Korean domestic cryptocurrency exchanges as “financial companies” and includes regulations on anti-money laundering and cryptocurrency financing, among other things.
In addition, the Financial Information Analysis Institute (FIU) of the Financial Services Commission of Korea will formulate a series of measures such as subordinate regulations to smoothly implement the amendment. Relevant departments will also actively collect opinions from the encryption industry and private experts.
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What are the main contents of the Special Financial Law Amendment?
1. Define cryptocurrency-related businesses as "virtual asset operators (VASP)".
2. Digital asset operators must comply with the operator's business, such as reporting to the Financial Information Analysis Institute (FIU) of the Korean Financial Commission, anti-money laundering obligations (customer confirmation and suspicious transaction reports, etc.) and additional obligations. Specifically, those who fail to declare their businesses will be punished with imprisonment for up to five years and a fine of up to 50 million won. This effectively means that the government will directly regulate the cryptocurrency market within the legal framework.
3. Financial companies that trade with digital asset operators must abide by the following obligations: check the representative of the operator and the purpose of the transaction, check whether the operator has submitted a declaration, and whether the funds are managed separately.
In fact, previously, the Korean Financial Services Commission expressed its willingness to manage the virtual asset trading market by reviewing the business scope of virtual asset operators, the operating method of the reporting system, and the operating conditions of real-name accounts. Exchanges that do not meet the standards set by regulators are more likely to be forced out of the market.
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How has the crypto community reacted?
The crypto community generally welcomes the institutionalization of cryptocurrencies. Previously, most domestic cryptocurrency exchanges in South Korea called for the rapid passage of the revision of South Korea’s special financial law.
Some practitioners also emphasized that since some major countries in the world have established regulations related to cryptocurrencies, there is an urgent need for South Korea to keep pace and ensure global competitiveness.
However, a person in the Korean legal profession pointed out that after the passage of the special financial law amendment, only large exchanges with financial strength such as Bithumb and Upbit can survive, while other small and medium-sized trading websites will have to withdraw from the market. In addition, the revision of the special financial law that includes real-name accounts and other content includes real-name account certification and other content, which may be a fatal blow to the encryption industry.
The industry expects that discussions on the taxation of cryptocurrencies will become more active as a result of the Korea Internal Revenue Service’s collection of “a total of more than 80 billion won (including local taxes) in taxes involving foreign customers’ withholding tax” from Bithumb.
On the other hand, South Korea’s Financial Services Commission is expected to actively formulate guidelines for cryptocurrency trading businesses based on the revision of the Special Financial Act.
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South Korea’s Cryptocurrency Institutionalization Process
Xiao Cong organized the institutionalization process of South Korean cryptocurrency according to the timeline.
In November 2016, a digital currency working group was established.
In December 2016, Shinhan Bank opened a bitcoin remittance channel between China and South Korea.
In June 2017, the South Korean government held a bitcoin auction.
In July 2017, representatives of the Democratic Party of Korea drafted an amendment to regulate and legalize cryptocurrencies.
Effective July 18, 2017, the revised Korean Foreign Exchange Act allows fintech companies to register with the Financial Supervisory Service (FSS) to "provide international money transfer services for small amounts of money," including bitcoin.
In early September 2017, South Korea's Ministry of Science and Technology and the Communications Commission announced that they would conduct on-site inspections of cryptocurrency service providers such as bitcoin exchanges.
In September 2017, South Korea plans to punish ICO projects.
At the end of September 2017, South Korea’s Financial Services Commission (FSC) stated that it would ban all forms of token financing (ICO).
In October 2017, the Governor of the Bank of Korea stated that Bitcoin is a commodity and not a currency.
In December 2017, South Korea banned financial institutions from engaging in cryptocurrency activities.
In December 2017, the South Korean government cracked down on fraudulent exchanges.
In December 2017, the South Korean government announced that it would take more measures to regulate cryptocurrencies, including the real-name system for cryptocurrency transactions, the prohibition of anonymously opening cryptocurrency accounts, and the closure of virtual currency exchanges.
On December 24, 2017, the Korean Government Policy Coordination Office will ban the use of anonymous accounts for cryptocurrency transactions, and prohibit banks from providing settlement services for unidentified cryptocurrency transactions. The newly proposed legislation will come into effect in January 2018.
In January 2018, traders without real-name authentication will face fines.
In January 2018, South Korea’s Ministry of Defense banned the military from trading cryptocurrencies.
In January 2018, 25 South Korean exchanges participated in the cryptocurrency self-regulatory initiative.
On January 21, 2018, South Korea intends to require banks to have all virtual currency transaction information.
January 22, 2018, Yonhap News Agency: South Korea will impose a 24.2% corporate and local income tax on Korean virtual currency exchanges, starting in 2018.
On January 30, 2018, South Korea began to implement the real-name system for virtual currency transactions. Six banks, including Shinhan Bank, Nonghyup Bank, Enterprise Bank, Kookmin Bank, Hana Bank, and Gwangju Bank, which conduct transactions with virtual currency exchanges, will implement real-name verification for newly opened accounts.
On January 31, 2018, the Korean Customs and Taxation Service: will begin to focus on cracking down on unregistered foreign exchange business using virtual currencies.
On February 1, 2018, South Korean Finance Minister Kim Dong-yeon stated that the government always pays attention to the use of digital cryptocurrencies for illegal overseas transactions, and will formalize the management of digital currency transactions.
On March 23, 2018, South Korea’s Financial Services Commission (FSC) is considering lifting the ICO ban.
From April 19th to 25th, 2018, the Financial Intelligence and Analysis Institute (FIU) of the Korean Financial Services Agency and the Financial Supervisory Service will conduct a review of the three banks (NH Bank, KB Bank, and KEB Bank) that provide virtual accounts for digital currency exchanges. Conduct a site inspection. The content of the inspection is compliance with the "Guidelines for the Prevention of Money Laundering Related to Digital Currencies."
On April 30, 2018, the Bank of Korea: South Korea's financial sector is preparing for digital currency taxation standards.
On May 6, 2018, the director of South Korea's new Financial Supervisory Service confirmed that the supervision of digital currency transactions has been relaxed.
In May 2018, the Korean National Assembly proposed to allow domestic ICOs.
On July 20, 2018, the virtual currency exchange tax was not included in the tax reduction plan of South Korea's 2018 tax law amendment
August 1, 2018, the Korean Parliament: It is necessary to review the issue of local taxes on virtual currencies, etc.
On August 14, 2018, the South Korean government announced that digital currency-related businesses and blockchain projects would be removed from the tax reduction bill.
On October 14, 2018, Choi Jong-ku, chairman of South Korea's Financial Services Commission (FSC), reiterated his negative stance on virtual currencies and ICOs at a meeting.
On October 24, 2018, the Korean Financial Supervisory Service (FSS) and the Korean Financial Services Commission (FSC) issued a statement stating that digital currency funds are not legal fund products and have not been filed with the Financial Supervisory Service. The Law on the Capital Market and Financial Investment Industry (hereinafter referred to as the "Capital Market Law") reminds investors to pay attention to risks.
At the end of November 2018, the South Korean government listed virtual currency as one of the nine major money laundering risk factors.
On December 2, 2018, Hong Nam-ki, the new Minister of Finance of South Korea, revealed that South Korea intends to tax cryptocurrencies and ICOs.
In January 2019, South Korea’s Financial Supervisory Service (FSS) released the results of its investigation on ICOs. During the three-month period from September to November 2018, FSS investigated 24 domestic ICO projects in South Korea (including 2 ICO projects that were halfway through interruption) was investigated. The South Korean government believes that the ban on ICOs should be maintained in order to protect investors and prevent the recurrence of speculative phenomena.
On March 28, 2019, lawmakers from the Democratic Party of Korea submitted an amendment proposing to punish unlicensed cryptocurrency exchanges.
On May 28, 2019, the South Korean government: It is paying close attention to the trend of the virtual currency market and recommends investors to invest in virtual currencies carefully.
At the end of September 2019, the President of South Korea was directly under the Chairman of the Fourth Industrial Revolution Committee: he will propose to the government to institutionalize encrypted assets.
On October 25, 2019, the Fourth Industrial Revolution Committee of South Korea urged the government to institutionalize cryptocurrencies and formulate related tax plans as soon as possible.
On November 21, 2019, the Legal Review Subcommittee of the Political Affairs Committee of the Korean National Assembly passed the amendment to the Special Financial Act.
On November 25, 2019, South Korea’s amendment to the special financial law on virtual assets was approved by the Political Affairs Committee and needs to be passed by the Judiciary Committee and the plenary session of the National Assembly.
Shareholders of Bithumb Holdings, the operator of Bithumb Korea, stated on December 27, 2019 that the National Tax Service has imposed "a total of more than 80 billion won (including local taxes) in taxes involving foreign customer withholding tax on Bithumb Korea."
On December 30, 2019, South Korea’s Ministry of Planning and Finance: The taxation items in the current tax law do not include cryptocurrencies, but it is proposed to tax them through revisions to the tax law.
In January 2020, the South Korean Presidential Office Committee recommended that financial institutions be allowed to launch cryptocurrency-related products such as bitcoin derivatives.
January 20, 2020, informed sources: South Korea's Ministry of Finance is considering a 20% tax on cryptocurrency trading income.
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