The Financial Intelligence Unit (FIU) of South Korea's Financial Services Commission (FSC), addressed a key issue in the FIU's registration requirements for crypto businesses, or virtual asset service providers (VASPs), during DAXPO 2021.
DAXPO is an annual blockchain conference hosted by CoinDesk Korea. This year's event was held on Nov. 14 and 15 at the Paradise Hotel in Busan.
Jeon Yo-seop, head of the FIU's Planning and Coordination Office, attended DAXPO 2021 as a speaker.
As a representative of the country's top financial regulator, Jeon addressed a peculiarity in the country's regulations for VASPs.
The Financial Transactions Reports Act (FTRA) requires all VASPs to register under the FIU. The registration deadline was this past Sept. 24.
Registration is a complicated process, and the FIU only approves registration applications from VASPs that meet certain preconditions.
If you're curious about those preconditions, click here.
So far, the FIU has received 42 registration applications. Exchanges comprise 29 of them. The remainder are staking services (6) and wallet services (7).
As mentioned above, the registration deadline was Sept. 24. But what about startups and newly founded VASPs?
The FIU has stated that it will accept applications from VASPs that have been in operation for at least two months.
The source of this two-month requirement lies in one of the requirements for FIU registration.
The FIU requires any VASP to have its internet security protocols, or Information Security Management System (ISMS), inspected and certified by the Korea Internet and Security Agency (KISA).
KISA only provides ISMS certifications for VASPs that have been in operation for two months or more.
However, the FTRA says that any newly formed VASP that meets FIU registration requirements can apply at any time.
In short, the FIU's stance and the FTRA potentially contradict each other.
Jeon addressed this contradiction during his DAXPO speech.
"The FIU is consulting with the Ministry of Science and ICT to address this issue, and we are working to solve it," Jeon said.
"Although we cannot provide any guarantees at this moment, the FIU is working on a solution."
Jeon also addressed NFTs and DeFi in his speech.
According to Jeon, the FIU views NFTs not as financial products but as digital collectibles. The FIU's stance regarding DeFi, however, is vague.
"Currently, the FTRA does not contain any language regarding DeFi lending services," Jeon said.
"There is no definite answer for DeFi right now. This is a topic that requires much more discussion and debate going into the future."
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