Korean authorities plan virtual currency moves

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The proliferation of virtual currencies in South Korea has resulted in a highly volatile environment for speculative and unregulated trading on the Korean virtual currency exchanges, Korean firm Bae Kim & Lee has warned.

The Korean virtual currency market remains desirable to issuers of initial coin offerings (ICOs), due in large part to Korea’s advanced e-commerce, online banking and P2P infrastructure being readily suited to the adaptation of blockchain technologies.

In a recent update, the firm said the Korean government has shown growing interest in, and concern about, the widespread availability, sale and use of virtual currencies in Korea, particularly with regard to the potential for fraudulent or illegal activities, and the increasingly speculative nature of the Korean virtual currency market.

Several Korean regulatory bodies including the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have issued proposals, guidance and directives in an attempt to formulate a regulatory response to the growing Korean virtual currency market, Bae Kim & Lee said.

Among these, the FSC has announced a plan to propose amendments to existing legislation that would impose KYC and AML requirements directly on Korean virtual currency service providers, including virtual currency exchanges. The FSC has also signalled its intention to enact new legislation that would impose certain obligations, such as adequate disclosure requirements and prohibition on virtual currency price manipulation, on virtual currency service providers including virtual currency exchanges.

The firm said Korean regulators are also considering a diverse range of other legislative proposals including a registration or licence requirement for virtual currency exchanges and taxation of transactions involving virtual currencies. But the regulators’ position at present appears to be to observe developments in other foreign jurisdictions prior to formulating any comprehensive regulatory regime for implementation in Korea.