Last week, rumors began to surface that South Korean financial regulators were on the verge of announcing major changes in the country’s current policies on cryptocurrencies. Given the skeptical tone taken by many South Korean leaders — only a few weeks ago, Prime Minister Lee Nak-yeon suggested that bitcoin and related projects might “corrupt the nation’s youth” — some worried that the country was considering an across-the-board ban on cryptocurrency exchanges, a move already taken by China. Today’s announcement of those new rules should put many of those fears to rest for the South Korean crypto community.
Cryptocurrency exchanges operating in the county will now need to comply with fairly standard anti-money laundering and anti-terrorism funding rules. The new rules require that exchanges confirm the identity of each user and submit proof of income, engage in face-to-face interviews to comply with existing Know Your Customer (KYC) policies, and provide cryptographic keys and access for law enforcement. Other reforms, such as providing customers with 3rd party fiat accounts, investment warnings, and transparent orderbooks, essentially require cryptocurrency exchanges to meet the same standards as stock exchanges and brokerages.
The announcement of the new regulations seems to have calmed South Korean bitcoin markets, which have recently seen premiums as high as $3,500 per BTC over global prices averages as investors scrambled to purchase coins while the local exchanges were still open and fully legal. As of this writing, BTC, ETH, and LTC prices on South Korean exchange Bithumb were comparable to those on U.S. and European exchanges.
At the same time, today’s announcement did little to clarify the situation for ICOs, which have been in legal limbo in the country since November. While regulators have walked back statements that implied a coming ban all ICO token sales and trades, the direction of future ICO reforms is far from certain. South Korea’s Financial Services Commission (FSC) vice-chairman Kim Yong-beom suggested last week that ICOs may be allowed for “professional investors,” but that “regular citizens who are not informed of its technology and complicity” could be barred from participating.