Virtual asset service providers in the country will not be allowed to handle “dark coins.”
According to a Nov. 3 announcement from South Korea’s Financial Services Commission, or FSC, virtual asset service providers will no longer be able to handle any digital assets that present a high money laundering risk. These updates were made as part of the guidelines under the Special Payment Act — regulation which specifically covers the legality of cryptocurrencies in South Korea. The FIU specifically called out “dark coins”, which are privacy-oriented cryptocurrencies, for having transaction records that are reportedly difficult for the group to trace. This could potentially affect the usage of privacy coins such as Zcash (ZEC), Monero (XMR), and Dash (DASH).
The financial watchdog’s amendments to the Special Payment Act are expected to be enforced starting in March 2021. The crypto bill calls for existing exchanges to employ sufficient Know Your Customer, or KYC, and anti-money laundering, or AML, policies. Exchanges must also report their operations within six months of the law’s implementation. In addition to not handling privacy coins, virtual asset service providers are required to confirm the real names of their customers by verifying them against personal data, such as national identity numbers.
Many crypto exchanges in the country already do not list privacy coins due to existing international regulations. In September 2019, the South Korean arm of cryptocurrency exchange OKEx removed ZEC, XMR, DASH, Horizen (ZEN), and Super Bitcoin (SBTC), citing guidelines set out by the Financial Action Task Force. Local crypto exchange Upbit announced that same month it would cease trading support for three privacy-focused cryptocurrencies.