South Korea has become a hotbed of cryptocurrency activity. The country is the world’s largest market for bitcoin, with some 26 percent of global transactions taking place there. The government of South Korea has also been an active participant in the cryptocurrency activity space, with regulators taking steps to rein in what they see as a speculative bubble.
The South Korean government is ramping up its investigations into crypto exchanges and their security risks after the hack of Bithumb, one of the largest bitcoin exchanges in the world. In addition to investigating Bithumb, the government of South Korea said it would conduct on-site inspections of six other exchanges and three other virtual currency companies hacked since 2016.
Cryptocurrency Regulation in South Korea
The Financial Services Commission also plans to increase cryptocurrency regulation by requiring banks to monitor accounts that make or receive virtual money transfers, and monitoring accounts suspected of speculation or illegal activity by sending tax notices and conducting surveys through banks.
South Korea’s Financial Intelligence Unit has already begun inspecting local banks’ compliance with anti-money laundering rules after discovering that some were helping clients launder money through cryptocurrencies over long periods without reporting any suspicious transactions — despite being required to do so by law.
There is no doubt that South Korea’s increased investigations into cryptocurrency regulation have garnered the negative attention of many crypto-enthusiasts. However, whether or not these tighter regulations are warranted remains to be seen. Regulation is never a good thing in the short term, but it could encourage more government backing and support for crypto entities in the long run. But for now, we will have to wait and see just how much damage these investigations inflict upon the Korean crypto industry.
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