The task force assembled by South Korea's ruling Democratic Party for issues related to cryptocurrency, or "virtual assets," has clarified that there can be no additional extensions on the registration deadline for crypto exchanges, which are legally referred to as virtual asset service providers (VASPs).
The task force held its third meeting on the issue at the headquarters of the Korea Securities Depository (KSD), central securities depository, on July 27.
Domestic crypto exchanges with fiat on-ramps are legally required to register with financial authorities by Sept. 24. Those that don't will be shut down. The registration process is complicated, however, and requires a commercial bank partnership -- something most exchanges don't have.
South Korea's four biggest exchanges -- Bithumb, Upbit, Coinone and Korbit -- currently have bank partnerships, but their contracts expire on Sept. 24. The respective banks they work with have yet to confirm a contract that extends beyond the Sept. 24 deadline.
Banks are hesitant to extend their contracts because partnerships with VASPs will bring extra scrutiny from regulators. Banks will also share legal responsibility if money laundering or fraud occurs at an exchange they work with.
Currently, no exchanges have filed their registration. This is mostly likely due to the uncertainty of their bank partnerships. Also, because registrations need to be “approved” by the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC), exchanges have an incentive to hold off until as long as possible while they prepare for their evaluations.
This preparation process includes beefing up their know-your-customer (KYC) and anti-money laundering (AML) protocols, enhancing the security of their networks, and delisting all dark coins or any “questionable” token projects that might attract unwanted attention from regulators. (Up until now, some exchanges have listed as many tokens as possible in order to maximize their transaction fees, regardless of how shady a project was.)
The People Power Party, the Democrats' main opposition, has insisted that the registration deadline be extended to the end of the year.
During Tuesday’s meeting, however, Kim Byung-wook, a Democratic lawmaker who heads the task force, announced that "extending the deadline won't solve anything."
"In fact," Kim added, "it would make things worse by adding confusion and uncertainty."
Jo Myung-hee, a lawmaker with the People Power Party, announced on the same day that she was planning on writing and submitting a bill that would extend the VASP registration deadline to Dec. 31.
Agreement on need for crypto legislation
While the two parties clearly disagree on the deadline, both have expressed the need for crypto specific legislation. Currently laws regulating crypto are merely AML laws that have been amended to apply to VASPs.
"There isn’t anyone that is explicitly opposed to legislation that specifically focuses on virtual assets, and there is a level of bipartisan consensus on this issue," Kim said during the meeting.
Kim added that the process of drafting the legislation will begin as soon as a bipartisan deal is reached.
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