South Korean lawmakers have passed a bill that aims to protect investors in the cryptocurrency market. The bill, which was approved by the National Assembly on Friday, requires crypto exchanges, asset managers, and custodians to register with the Financial Services Commission (FSC) and comply with anti-money laundering and consumer protection rules. The bill also imposes a 20% tax on crypto income above 2.5 million won ($2,100) per year.
The South Korean National Assembly opines that the bill will provide a legal framework for the regulation of cryptocurrencies and digital assets in the country. The bill, which was approved by a unanimous vote on June 29, 2023, aims to protect investors from fraud, money laundering, and other risks associated with the crypto industry.
The bill defines cryptocurrencies as “digital assets that can be traded or transferred electronically using cryptographic methods”. It also requires crypto-related businesses, such as exchanges, custodians, and brokers, to register with the Financial Services Commission (FSC) and comply with anti-money laundering (AML) and know-your-customer (KYC) rules. Additionally, the bill imposes a 20% tax on income from crypto transactions exceeding 2.5 million won ($2,200) per year.
The passage of the bill is seen as a positive step for the development of the crypto sector in South Korea, which is one of the largest markets for digital assets in the world. According to a report by Chainalysis, South Korea ranked third in terms of crypto adoption among 154 countries in 2022. The report also estimated that South Koreans traded over $106 billion worth of cryptocurrencies in 2022, accounting for 17% of the global market share.
The bill is expected to provide more clarity and certainty for both investors and businesses in the crypto space, as well as enhance the credibility and legitimacy of the industry. The bill will also help prevent illegal activities and protect consumers from scams and hacks that have plagued the crypto scene in recent years. For instance, in 2018, two major South Korean exchanges, Coinrail and Bithumb, were hacked and lost over $70 million worth of cryptocurrencies combined.
The bill will take effect in September 2023, after a three-month grace period for existing crypto businesses to comply with the new regulations. Those who fail to do so will face fines or imprisonment. The FSC will also issue detailed guidelines and standards for the implementation of the bill in the coming months.
The bill is widely welcomed by the crypto community in South Korea, as well as by international observers and experts. Many believe that the bill will set a precedent for other countries to follow suit and adopt a more progressive and supportive stance towards cryptocurrencies and digital assets.
In a different shift, Vitalik Buterin, the co-founder of Ethereum, has recently expressed his concern about the possible regulatory actions that the U.S. Securities and Exchange Commission (SEC) might take against some of the emerging blockchain platforms, such as Solana, Avalanche, and Polkadot.
In a podcast interview with Lex Fridman, Buterin said that he was worried that these platforms, which have been gaining popularity and market share in the decentralized finance (DeFi) and non-fungible token (NFT) sectors, might face the same fate as Ripple, which is currently embroiled in a lawsuit with the SEC over whether its XRP token is a security or not.
Buterin argued that these platforms, which he called “rollups on steroids”, are essentially centralized entities that have a lot of control over their networks, such as the ability to pause transactions, roll back blocks, or censor users. He said that these features might make them more vulnerable to regulatory scrutiny and intervention, especially in the U.S., where the SEC has been cracking down on crypto projects that it deems to be offering unregistered securities.
Buterin said that he hoped that these platforms would eventually decentralize more and adopt more transparent and democratic governance models, but he also acknowledged that this might be difficult to achieve in practice. He said that he was not trying to criticize or attack these platforms, but rather to warn them and their users of the potential risks they might face in the future.
He also said that he was not worried about Ethereum’s own status as a security, as he believed that Ethereum had sufficiently decentralized over time and had established itself as a public good that benefits the whole crypto ecosystem. He said that Ethereum’s upcoming transition to proof-of-stake (PoS) and Shanghai Upgrade would further enhance its scalability, security, and sustainability, and make it more competitive with other platforms.
