South Korea’s National Assembly has approved an overhaul of the country’s crypto licensing regime, tightening entry requirements for virtual asset service providers (VASPs) and expanding scrutiny to include controlling shareholders.
On Thursday, lawmakers passed an amendment to the Act on Reporting and Using Specified Financial Transaction Information, a cornerstone of Korea’s Anti-Money Laundering (AML) framework for digital assets. The committee substitute bill was approved at a plenary session and is expected to take effect six months after the law is enacted.
The new rules widen background checks for crypto firms applying to operate in South Korea. Regulators will now vet not just company executives but also major shareholders. The list of red flags has also grown, extending beyond financial crimes to include offenses such as drug trafficking, tax evasion, fair-trade violations, serious economic crimes and breaches of the country’s crypto user protection law.
Furthermore, the amendment gives the Financial Intelligence Unit (FIU) more authority in deciding who gets licensed. The agency can now take a broader view of a firm’s ability to operate, looking at its finances, internal controls, legal track record and overall credibility.
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South Korea to allow conditional crypto licenses
Regulators will also be able to grant licenses on a conditional basis, allowing the FIU to impose requirements aimed at addressing money-laundering and user-protection risks.
Another provision closes a long-criticized loophole around enforcement against former financial industry employees. The FIU will now be required to notify a firm’s chief executive if a former employee is sanctioned for violating AML rules, with companies obliged to relay the notice to the individual and retain related records.
Implementation details and industry guidance are expected to be finalized ahead of the law’s entry into force by the FIU under the oversight of the Financial Services Commission, after approval by the National Assembly.
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South Korea considers ownership caps for crypto exchanges
On Wednesday, South Korea’s financial watchdog backed ownership limits for crypto exchanges, aligning them more closely with securities markets as part of plans under the proposed Digital Asset Basic Act. Financial Services Commission Chair Lee Eog-weon said exchanges should be treated as market infrastructure rather than ordinary private companies.
The comments come as regulators review a proposal to cap major shareholders’ stakes in exchanges at roughly 15% to 20%. The idea has faced pushback from exchange operators and concerns within the ruling party, but Lee’s remarks mark the strongest signal yet that the FSC is prepared to move forward with stricter governance rules.
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