With mutual evaluations of the Financial Action Task Force (FATF) scheduled to be implemented next year, the Financial Services Commission (FSC) is taking a passive attitude toward the revision of regulations governing cryptocurrencies. At a time when clear definitions and classifications on cryptocurrencies including security tokens and utility tokens have yet to be set, the top Korean financial regulatory body appears cautious for fear of presenting regulations that don’t conform to international standards.

In a debate on the “revision of 2 laws concerning the promotion of the blockchain industry” held in the National Assembly Wednesday, lawmakers, government officials and industry representatives exchanged opinions on how to regulate cryptocurrencies and crypto exchanges and the legal nature of digital currencies in connection with revision bills submitted by lawmakers. Rep. Je Youn-kyung of the ruling Democratic Party of Korea and other lawmakers have presented revision bills on cryptocurrencies and money laundering.

“The world still has no unified regulatory framework governing virtual asset money laundering,” said Yoo Jae-hoon, head of the planning and administration office at the Korea Financial Intelligence Unit, adding that the FATF adopted a relevant statement and discussed how to introduce anti-money laundering requirements in October. In its statement on Oct. 19, the inter-governmental anti-money laundering agency urged countries to conduct customer due diligence including ongoing monitoring, record-keeping and reporting of suspicious transactions.

“There will be mutual evaluations involving anti-money laundering measures from next year. But we feel it difficult for virtual assets to pass mutual evaluations unless properly regulated, because they are highly likely to be used for money laundering,” Yoo said.

FATF’s mutual evaluations are scheduled to begin next year with 35 member countries conducting mutual evaluations every 10 years. The FATF evaluates members’ compliance with its anti-money laundering (AML) and combating the financing of terrorism (CFT) recommendations and slaps sanctions if they fail to meet the standards.

Earlier on Oct. 13, Noh Hyeong-ouk, new minister of the Office for Government Policy Coordination, said he would not hasten to draw up the cryptocurrency regulatory framework and watch international trends. “The Korean government is in a position to keep regulations to a minimum and wait to see how other countries act before deciding on its regulations,” Yoo said. With respect to a revision bill submitted by Rep. Je, Yoo said there is no other alternative but to delegate some of FSC’s anti-money laundering measures to the enforcement ordinance.

Lee Sang-yong, vice chairman of the Blockchain Law Society, who is concurrently a professor at Chungnam National University Law School, said, “For security tokens where there are separate issuers, it would be right to apply same regulations as imposed on securities. But excessive regulations on business entry and prudence are not proper.”

/Jaeyeon Won Reporter wonjaeyeon@decenter.kr

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