South Korea is the third most economically important and developed market in the world, and every day more and more investors are betting on this jurisdiction. The government, in an effort to prevent the illegal circulation of income and any cash flows, as well as speculation, requires that transactions related to the transfer and exchange of cryptocurrencies are not anonymous. South Korean government has rejected the justice minister’s initial intention to ban cryptocurrency transactions after fierce resistance from parliament and citizens. Although plans for a ban have faded, authorities and financial actors are concerned about avoiding further tax crimes. Below we will consider the main aspects related to the regulation of the crypto-sphere in force in this jurisdiction.
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Crypto regulation in South Korea
Cryptocurrencies in South Korea have become a growing trend that is gaining widespread interest. Over the course of several months, this market has shown a rapid level of development and enormous prospects. Investors from all socio-economic sectors understand that virtual money represents a real opportunity to increase the value of their savings, and this belief has spread so quickly that during 2017 the value of this type of currency has increased significantly compared to real money.
South Korea is the third market with the greatest influence on the value of Bitcoin in the world after the United States and Japan. This is because large savers and young investors have invested their funds in this type of currency.
To prevent corruption and possible fraudulent transactions related to VFA, among the first measures taken was the cessation of funding for the development of cryptocurrencies from public funds. In addition, the government announced that it will not ban such transactions, but will establish procedures to allow transactions to be carried out only by people with proof of identity, to avoid trading in anonymous cryptocurrencies, which allow for illegal circulation of funds and any speculation. Thus, this practice will avoid tax crimes.
South Korea has created a new regulatory framework that has allowed the crypto industry to develop in a more secure and transparent manner. In its regulation, the jurisdiction seeks to adapt to new technologies to encourage the penetration of innovative technologies into the financial system and strengthen its leadership as a world-renowned technology hub.
South Korea’s Basic Law on Digital Assets, which was implemented this year, aimed to promote cooperation between the country’s government agencies, banks and financial institutions to include crypto assets in the institutional framework. One of the most important points detailed in the new cryptocurrency bill is the construction of a digital system and infrastructure capable of guaranteeing the security and integrity of user interactions in order to attract new investors and participants into the crypto industry.
Traditional banking will also be integrated with the cryptocurrency industry in the future. This is necessary in order to create an internal connection between both systems and expand the number of institutions that can operate in this environment and provide service to citizens using digital assets.
The previous strict regulations that previously existed regarding cryptocurrencies have been lifted, but without risking the safety of investors, as the new legal provisions also include compliance with ALM rules, which help minimize the risks of financial crimes and other illegal activities.
Exchanges, trusts and companies dealing with digital wallets and ICOs must have a partnership with an approved Korean bank for verification and identification. Opening a single account for withdrawing and depositing funds to the exchange and back for each person is primarily aimed at preventing the illegal circulation of funds and combating the financing of terrorist initiatives.
One of the most important points of the new measure is that companies must obtain information security management system (ISMS) certification. The permit is issued by the Korea Internet Security Agency, which certifies that a company can protect key information assets for itself and its users.
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To get crypto exchange license in Korea
In order to get this type of permission, you must go through several important steps.
- Choosing a firm’s operating model. A firm must decide between offering custodial services for assets on the firm’s infrastructure or allowing users to store keys themselves through non-custodial storage. This choice is critical because it determines the level of control a company has over its users’ private keys, which is a critical aspect of crypto-currency storage. Companies that choose trusted storage are responsible for the safety of their users’ private keys. Firms that choose self-service user storage allow clients to manage and protect their keys.
- Compliance and due diligence. Any activity related to the provision of services in this area is strictly regulated by legislative and regulatory documents that guarantee not only the safety of the environment in which the activity is carried out, but also establish a framework that allows standardization and unification of certain aspects of the business. Providers of such services must comply with the rules set by the relevant regulatory authorities, which, in turn, must not conflict with the internal policies of the company.
- Compliance with local regulations in the field of financial control. Compliance with local economic regulations is critical for organizations wishing to obtain a cryptocurrency license. Compliance with these rules ensures that the business activities of the license applicant are consistent with the economic objectives of the jurisdiction.
In general terms, the process of applying for a crypto license in South Korea can be described as below.
- Investors need to register local company and open a business account in a reliable bank.
- Hiring personnel, incl. 1 director with residency.
- Purchase of equipment and installation of software.
- Preparation and submission of documents for the application.
The processing time for an application varies from two to six months, depending on the completeness and correctness of the data. Requirement list for a cryptocurrency company include the following:
- monitoring and ongoing maintenance of financial records;
- the company must implement a policy that minimizes the risk of illegal circulation of funds;
- registration with all authoritative bodies needed;
- drawing up policies to identify suspicious transactions;
- company personnel must undergo training periodically;
- the firm must implement customer due diligence procedures.
To apply for crypto license in South Korea, businesspersons need to provide a number of specific documents. These documents are necessary to demonstrate that the company meets the requirements set by regulatory authorities.
First, a detailed business plan must be submitted that clearly describes the business model and services that will be offered. This plan should include information about the management team, key personnel and their experience in the industry.
Detailed financial information about the company and its activities is also required. It may include audited financial statements or certified accounts.
Other important documentation includes certified copies of the company’s articles of incorporation, as well as any other relevant legal documentation such as powers of attorney or other important contracts. You will also need to provide additional documentation required by the relevant regulatory authorities. Therefore, it is important to carefully check what the specific requirements are before starting the application process. Our lawyers will help you bring your company into compliance with all regulatory parameters.
How much does a crypto license cost in South Korea?
The cost of obtaining this type of permit in South Korea is calculated individually in each case, since it depends on many related factors. Our specialists will calculate the exact price for you before starting cooperation.Our team is ready to become your reliable allies on the path of your commercial development. We offer qualified assistance in obtaining a PSP license in Hong Kong, Vanuatu, Portugal, Latvia and other countries. Contact us right now.