Blockchain forensics firm Chainalysis announced on March 10 that it will partner with South Korea-based cryptocurrency exchange, Bithumb following the successful passing of new crypto-currency laws in South Korea.
Bithumb will use the Chainalysis Reactor Inquisition tool to monitor skeptical activities on its platform. The main reason for Bithumb’s latest move is to keep up with the most recent amendment to the Special Financial Transactions Information Act.
The Korean Government is accelerating the imposition of digital currency taxes following the adoption of the amendments by the National Assembly. According to the Financial Services Commission (FSC), the revised regulations require cryptocurrency firms to implement anti-money laundry measures to ensure that individuals use their real names in the same way as traditional banks.
In addition, the new regulations will provide the Korean tax authority with a foundation to create a legal framework for the taxation of digital assets. As a result, exchange firms will be obliged to provide the authorities with details of their customers and their records of purchases for tax purposes.
Korean exchanges to comply with new regulations by 2021
The South Korean government intends cryptocurrency exchanges to fully implement the new requirements by September of next year. Some provisions of the revised act can take up to 12 months to be fully implemented. The new apparatus could take another six months to come into effect.
According to Thumb’s head of compliance, Sungmi Lee, the lawmakers may further strengthen the rules in the future. He argued that the exchange expects much tougher regulations, and therefore needs to be armed with sufficient support before that. Korea’s exchange companies are required to report their activities to the country’s financial authorities. They are required to obtain the real name of the user from banks in the country. Failure to comply will result in an exchange being fined up to $42,000 in fines or a prison term of up to five years.
Additionally, the law requires all the exchange firms to have their infrastructure attested by Korean Internet Security Agency (KISA). Currently only four exchanges have completed the expensive and time-consuming KISA certification. Bithumb, Upbit, Coinwon, and Korbit are among the companies to have obtained this award.
Chainalysis to help Bithumb Strengthen its AML and CFT Practices
According to the chief revenue officer at Chainalysis, Jason Bonds:
“As cryptocurrency use in South Korea continues to grow, new regulations such as this will make blockchain analysis solutions like Chainalysis vital for compliance.”
The high number of hacks in the country last year on cryptocurrency exchanges; called for the need for the government to introduce measures, in particular, to increase transparency. As a result, Bithumb aims to improve their AML and counter terrorism financing (CFT); with the support of the Government’s Chainalysis Reactor tool ahead of such initiatives.
South Korea is among the countries that have recently revised its domestic digital assets regulations to ensure they meet the standards set by the Financial Actions Task Force (FATF). During the past couple of days, Switzerland, South Korea, Singapore, The United Kingdom, Ukraine, Hong Kong, Dubai and Japan; have all amended their domestic cryptocurrency guidelines to meet the standards laid down by the G7’s FATF.