In brief
- More than 2,000 cases of coronavirus have been confirmed in South Korea, which has raised its alert for the virus to its highest level.
- Congress' response to the outbreak has delayed legislation to bring the country in line with FATF guidelines.
- The legislation would require exchanges to comply with stricter anti-money laundering and terrorist financing prevention rules.
This week, South Korea raised its coronavirus alert to its highest level, with the outbreak in the country surpassing 2,000 confirmed cases in the past day. With South Korea's National Assembly focused on its response to the virus outbreak, it’s expected to delay passing key cryptocurrency legislation until March.
Congress was originally scheduled to pass a regulatory framework that adopts cryptocurrency guidelines laid out by G7 watchdog the Financial Action Task Force (FATF).
What are the FATF guidelines?
In June 2019, the FATF released regulatory guidelines that would see governments tightening control over cryptocurrency exchanges and financial service providers dealing with digital assets. The guidelines require stricter anti-money laundering (AML) and terrorist financing prevention compliance from companies.
The National Assembly of South Korea had already approved the framework in November 2019; it was awaiting final approval from the Congress.
When passed, the legislation would apply more pressure on existing cryptocurrency exchanges to adhere to rigorous AML policies, which would give the Financial Services Commission (FSC) and other relevant financial authorities in South Korea more control over the cryptocurrency exchange market.
It would also legitimize the local cryptocurrency market, since exchanges will have to register with the FSC and obtain an information security management (ISMS) license to operate.
South Korea’s proposed cryptocurrency legislation in South Korea is similar to that already approved in Hong Kong. Earlier this month, Hong Kong’s financial watchdog formalized strengthened AML and terrorist financing prevention requirements for cryptocurrency exchanges.
Following the encouragement of the G20 to all of its member countries to adopt the cryptocurrency guideline created by the FATF, most major cryptocurrency markets including Japan, South Korea, and Hong Kong have quickly implemented stricter policies to govern cryptocurrency firms.
Legislation creates challenges for exchanges
Stricter requirements could create a challenging environment for both minor and large-scale cryptocurrency exchanges, especially with the volume of the cryptocurrency market dropping since mid-2019. On BitMEX, for instance, weekly volume of the Bitcoin perpetual swap has dropped from $55 billion to $19 billion since June 24, 2019.
It comes after a difficult year for South Korean exchanges, with leading lights Bithumb and UPbit having faced high profile hacks, investigations, and hefty tax bills.