Cryptcocurrency exchanges in South Korea serving won-backed trade would come under the same stringent oversight as banks after a new set of rules have brought digital tokens to legally-bound administration, according to the chief of the Korean Financial Intelligence Unit.

“Virtual asset trade should be watched with greater concentration as they can be more easily laundered,” Kim Jung-gak, commissioner of Korea Financial Intelligence Unit (FIU) under top financial policymaking Financial Services Commission, told Maeil Business Newspaper in a recent interview.

The watchdog will keep “rigorous” surveillance on exchange operators’ compliance with liability in preventing money-laundering.

The FIU has formed virtual asset supervision bureau last month in line with the effectuation of a new rule that has mandated coin operators to register with FIU upon certified with state-authorized security system and real-name bank accounts.

Exchanges who have passed the new threshold have been given must-do list to prevent money-laundering.

Kim agreed a broader and comprehensive virtual asset business license act was needed based discussions on regulating the issuers, licensing exchange operators, listing digital coins, setting the disclosure guidelines and penalizing unfair practices.

The next move would target decentralized finance, or DeFi, and non-fungible token (NFT) operators. DeFi uses cryptocurrency and blockchain technology to manage financial transactions, and NFT is a digital asset that stores digital file ownership to blockchain.

Based on the final guidelines by the Financial Action Task Force, the inter-governmental watchdog that establishes standards for anti-money laundering and know-your-customer requirements, the Korean regulators will discuss applying the new rule on DeFi and NFT, said Kim.

The watchdog will also keep watch on monopolistic risk as the mushroomed exchange market has been shortlisted to four under the new rule.

Only four major crypto exchanges – Upbit, Bithumb, Coinone, and Korbit – can serve won-based crypto trade after finding bank partners to back real-name accounts. So far, only two Upbit and Korbit have made the final list of registering with the FIU.

By Yoon Won-sup and Lee Sae-ha and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]