Q. Is it possible for a corporation to deposit and withdraw in KRW for virtual asset transactions?
A. There is no regulation on the prohibition of deposit and withdrawal of Korean won by corporations under the current law. It can be seen that Article 10-4, No. 2 and No. 3 of the Enforcement Decree of the Special Money Act stipulates matters related to the identification of the customer of a corporation, and therefore it is assumed that the provision of virtual capital industry services is premised.
However, the International Money Laundering Prevention Organization (FATF) recommendation (which is the basis of the Special Interest Act) requires virtual asset business operators to comply with the standards of financial companies. The service is expected to be available only to virtual asset business owners who have established customer verification and money laundering prevention (AML) systems equivalent to financial companies’ and’financial companies’.
Q. Are Decentralized Exchange (DEX) and Decentralized Finance (Defi) companies also virtual asset providers subject to reporting under the Special Act?
A. Depending on the business model, it is determined whether it is subject to report by the Special Law. According to the’Virtual Real Estate Business Owner Reporting Manual’ released by the financial authorities, a virtual asset business operator means a person who actively promotes virtual asset-related activities through ▲ sales ▲ on behalf of customers ▲. Virtual asset transactions for the person (P2P, etc.), one-time activities, and the act of providing only the platform without commission are not applicable to virtual asset business operators.
In the case of Dex or DeFi, if it is not involved in virtual asset transfer, storage, exchange, etc., because it provides only a place where you can simply post an offer to sell or buy for the purpose of providing a decentralized platform, or because you do not have independent control over personal cryptographic keys. It is not subject to reporting in the virtual capital industry under the Special Regulations Act. However, if the company’s wallet is used to sell or purchase virtual assets, or if the business has factors such as the ability to modify the ledger, it is subject to reporting.
Q. In the case of a company that is a virtual asset business operator under the Special Act, but it is difficult to meet the requirements for receiving a report, is there any way to legally continue the business?
A. In order to report as a virtual asset business operator under the Special Fund Act, ▲ you must obtain information protection management system (ISMS) certification, and ▲ you must make financial transactions through a deposit/withdrawal account that can verify your real name. Also, in order to open a real name verification deposit and withdrawal account, it is necessary to pass the identification, analysis, and evaluation of money laundering risks of financial companies (banks).
Currently, a number of virtual asset related companies are considered virtual asset business operators under the Special Act, but they are likely to be in a difficult state to meet the reporting requirements. In order to continue the business related to virtual assets under the revised special law, a virtual asset storage company that provides only a program for the business to store and store personal encryption keys, and allows the customer to have independent control over the encryption key or file a report on the special special law. It should be modified to a business model that entrusts encryption key management to users.
Q. When is the fulfillment of the obligations under the Special Provisions Act? (Is it after the enforcement of the law or after acceptance of the report?)
A. A virtual asset business entity must fulfill its obligations to prevent money laundering (business report, customer verification, suspicious transaction report), etc. after the report is accepted. After accepting the report, the financial authorities plan to conduct inspections and supervision for violations of the obligations of virtual asset business operators.
Q. How long is the reporting deadline for Suspicious Reporting Transactions (STR)?
A. Article 4 of the current Special Fund Act stipulates that the period of reporting suspicious transactions is “without delay”, but the revised Special Fund Act supervisory regulations “3 business days from the time when the person in charge of reporting on money laundering prevention of financial companies, etc., judges as the object of reporting suspicious transactions Within”. However, considering that virtual asset business operators are normally operated 24/7 unlike general financial companies, it is necessary to clearly define the standard of’three business days’ as a period that can be actually reported to the financial authorities.
Q. Can a domestic virtual asset business provide services to foreigners or foreign organizations residing abroad?
A. Article 10-4 of the Special Funds Act requires foreigners to verify their real name, address, contact information, nationality, and domestic residence in order to verify the source of origin of foreigners and customers of foreign organizations. Foreign corporations must confirm the real name, type of business (purpose of establishment), the location of the head office and business place (the location of the main office), the name of the representative, the date of birth and nationality, and the location of the domestic office. Therefore, if a domestic virtual asset business operator can confirm the customer’s domestic residence or the location of the domestic office, it can provide services to non-resident foreigners and foreign organizations as well.
Q. What does it mean to manage separate transaction details for each customer?
A. Article 10-18 of the Enforcement Decree of the Special Money Act requires virtual asset business operators to’separate and manage transaction details for each customer’. Separate management of transaction details for each customer is generally considered to mean “a level of separating and managing transaction details for each customer in the database of a business operator, and inquiring them for each customer”.
Q. Do I have to fulfill the anti-money laundering obligation for stablecoins such as Tether?
A. Stablecoin means “an asset that guarantees price stability by linking with existing currency or real assets”. In the case of Tether, it is a fiat currency-backed stablecoin that is linked to the dollar at a 1:1 ratio. Tether holders can claim dollar payments to the issuer at a 1:1 ratio, and since tether is not a payment method or an external payment method under the Foreign Exchange Transaction Act, the legal nature of tether is considered to be a foreign currency bond. Therefore, virtual asset providers must fulfill their anti-money laundering obligations for stable coins linked to legal currency such as Tether. In addition, there are cryptocurrency-backed stablecoins and unsecured stablecoins, and FATF is requesting the application of anti-money laundering standards for stablecoins.
Q. Can you run a business that allows you to trade stocks by converting virtual assets into Korean won in partnership with a financial investment company?
A. If the virtual asset securities trading service is profitable, the financial investment company may conduct the business after reporting it to the Financial Services Commission (consignment to the Financial Supervisory Service) 7 days prior to the day the financial investment company intends to conduct the business as an incidental business. However, virtual asset business operators must have sufficient institutional measures to prevent illegal transactions such as money laundering and tax evasion, and a careful approach to business handling, such as identifying the source of funds from customers, is required.
Q. Can a virtual asset provider partner with a VAN provider to provide a service that pays with virtual assets at offline affiliated stores?
A. It is possible. Transactions using virtual assets as a payment method do not correspond to payment for credit cards, debit cards, or sunble cards, so they are not included in the scope of business of value-added telecommunications companies under the Specialized Credit Finance Business Act. In addition, the current Electronic Financial Transactions Act does not specifically stipulate a business that provides a payment system to affiliates, etc. so that virtual assets can be used as a payment method.