Financial Services Commission (FSC) Proposes Sweeping Changes Amidst Rising Concerns
- FSC proposes a ban on credit card transactions for cryptocurrency purchases, targeting money laundering and illegal cash outflow.
- Highlighting the risks associated with foreign exchanges operating outside local regulatory frameworks.
- Recent actions, including the disclosure of public officials’ crypto assets and Terraform Labs’ failures, signal South Korea’s robust approach to cryptocurrency regulation.
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South Korea’s Financial Services Commission (FSC) is taking a bold step to tighten regulations on cryptocurrency transactions. The regulatory body has proposed a ban on credit card transactions for purchasing cryptocurrencies, citing concerns related to money laundering and the potential for illegal cash outflow.
A recent legislative notice has brought to light the FSC’s deep concerns about the financial crimes associated with cryptocurrency purchases from foreign exchanges. The regulatory body, in particular, is focused on the risks of speculation and money laundering that may arise due to the unrestricted use of credit cards in these transactions.
South Korea’s existing laws governing cryptocurrency transactions strictly regulate the identity verification process. Users on local exchanges are required to go through a verification process involving deposits and withdrawals. This meticulous approach aims to ensure the legitimacy of transactions and prevent illicit activities.
Also Read: South Korean Financial Regulator Vows to Take Innovation into Account for Crypto Regulations
Challenges with Foreign Exchanges and Review Process
Foreign exchanges pose a unique challenge to South Korea’s regulatory framework. Operating outside the purview of local regulations, these exchanges function without adhering to the identity verification measures enforced within the country. The lack of uniformity in compliance raises concerns about the potential exploitation of the system for illegal activities.
The proposed ban on credit card transactions for cryptocurrency purchases is now set to undergo a thorough review and resolution process. During this period, the public will have the opportunity to provide feedback, playing a crucial role in shaping the final decision. The regulatory body emphasizes the significance of this phase in ensuring a comprehensive and well-informed approach.
If all goes as planned, the anticipated timeline for the ban’s implementation is set for the summer of this year. The regulatory authorities are keen on swift action to address the perceived vulnerabilities in the current system and mitigate the risks associated with credit card transactions in the cryptocurrency space.
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South Korea’s Recent Actions and Impact of Terraform Labs
South Korea has been proactive in its approach to cryptocurrency regulation. A recent disclosure mandate, which made around 6,000 public officials’ crypto assets public, reflects the government’s commitment to increasing transparency. These recent regulatory measures set the stage for the proposed ban on credit card transactions, showcasing a comprehensive effort to strengthen oversight.
The failures of Terraform Labs, the creators of the ill-fated LUNA crypto and TerraUSD stablecoin, had a cascading effect on the global crypto market. South Korea, home to Terraform Labs, faced repercussions, leading to a prolonged bear market. In response, the South Korean Prosecutor’s Office seized approximately $160 million worth of assets linked to Terraform Labs, marking a decisive crackdown on those involved, including co-founder Daniel Shin.
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