By Shelly Melancon (Switzerland)
Under the proposed update to financial reporting laws in South Korea, there will be stricter restrictions for crypto firms in the country. A news report from Korea Joongang daily states that the country’s financial services agency has made new amendments to its financial reporting system to encompass cryptocurrency deals.
What The New Financial Reporting System Entails
Under the new mandate, all crypto-related organizations such as custodial platforms, wallet providers, asset managers and exchanges must file their transaction records with the financial intelligence division. The financial intelligence division is a sub-division under the financial services commission which is in charge of monitoring anti-money laundering activities throughout the Asian country’s financial space.
This newly amended financial reporting law will take effect before the end of this month. However, there is an exemption for current virtual asset service providers. The authorities have given them a 6-months grace to comply with these new financial reporting rules.
One of the compliance protocols is the adoption of detailed customer identification processes by crypto service providers in the country. If these providers should suspect any fraudulent transactions, they must flag and report such transactions to the financial intelligence agency for deeper investigations.
Possible Ramifications For Non-Compliance
Failure to comply with this law after the next six months attracts a fine or a jail term. As of this writing, the fine is pegged at 51 million won (about $45,000), while the jail term is pegged at five years – there might be an upward or downward review of these terms. Apart from this proposed update to the financial reporting system especially as it relates to cryptocurrency in South Korea, there are other updates to the crypto-related activities in the Bibimbap-loving country.
Recall that the National Tax Service in the country has disclosed yesterday that it had found over 2,500 persons who are using cryptocurrencies to hide their assets and avoid paying taxes. Since the national tax service intends to find more tax defaulters using digital currencies to hide their assets, crypto exchanges have started sharing customer data with the tax body.
For instance, the authorities in Gyeonggi province recently revealed that it intends to probe all initial coin offerings and crypto-related multi-level marketing (MLM) schemes more thoroughly. You would recall that a May 2018 ruling of South Korea’s supreme court classified digital currencies as intangible assets which can be confiscated. In another development, the authorities’ decision to increase capital gains tax by 20% on all crypto trade profits above $2,300 will take effect from the first day of next year. Despite the government’s efforts, online fraud cases continue to rise because of the high volatility of the crypto industry.
Peak Crypto Trading Records in South Korea
There has been increasing popularity in virtual currency trading in South Korea this year. One possibility for such a spike might be the market’s rallies in recent times. Most exchanges in the country have experienced huge surges in crypto trading volume in the first two months this year, and there are no signs it would reduce.
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