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South Korean lawmaker proposes crypto-focused regulations

South Korean representative of the ruling Democratic Party Kim Byung Wook proposed a regulatory framework where financial institutions can terminate transactions with crypto-asset business operators that either fail to report to the Korean Financial Intelligence Unit (FIU) or are deemed as high-risk for money laundering.

In an interview with crypto news site Coindesk Korea last April 27, he stated that due to cryptocurrency’s novelty, it requires a regulatory framework unique from the traditional finance system.

According to Kim Byung Wook, the country currently lacks the legal framework that would support crypto as a trading digital asset in the country.

Momentarily, crypto exchanges are monitored through South Korea’s financial regulator, Financial Services Commission (FSC). Since the country doesn’t recognize cryptocurrencies as financial assets, an enforcement decree was issued on January 6 stating that cryptocurrency profits will be taxed as income starting January 2022.

In the decree, annual crypto profits that exceed the 2.5 million won mark will be taxed as ‘other income’ at a rate of 20%.

In the interview, Kim Byung Wook stated that he fully agrees with taxing crypto profits, however, the government should first prioritize the legislative and regulatory framework.

‘Taxing any sort of financial profit is a given, but we need to first establish a legal and administrative framework that applies specifically to crypto and virtual assets,’ Kim stated in the interview.

Kim also stated that establishing virtual asset legislation will allow Korea’s blockchain industry to prosper while protecting the investors and traders at the same time. Failing to establish this framework will allow South Korea to fall behind in the growing global industry.

He added that it will be a ‘problematic’ situation for the government to view crypto as a taxable profit without providing legal protection to investors.

However, the head of FSC, Eun Sung-soo, has stated at the National Policy Committee meeting last April 22 that it is not the government’s responsibility to protect the traders since crypto is inherently speculative. He also suggested shutting down all exchanges that will not register with the Anti-Money Laundering (AML) regulation.

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