South Korea’s crypto industry is bracing for another round of potentially stringent regulations, with a financial regulatory chief hinting that, after subjecting crypto exchanges to some of the world’s most stringent regulations, the decentralized finance (DeFi) and non-fungible token (NFT) sectors were next in line.
The head of the Financial Intelligence Unit (FIU), Kim Jeong-gak, stated that South Korea was keeping an eye on future Financial Action Task Force (FATF) recommendations on NFTs and DeFi, and that the country would strive for “international consistency.”
He did, however, add:
“We will discuss how to [regulate the two sectors] with relevant ministries, and these [decisions] will be reflected in [amended] financial law.”
Kim also issued a warning to the crypto exchange sector, which is already reeling from a crackdown that has resulted in only four trading platforms trading coins for fiat KRW. According to Kim, the FIU intends to “manage and supervise virtual currency exchanges using the same strict standards as banks.”
He claimed that money laundering was more likely in the cryptoasset market than in highly regulated financial institutions such as banks.
He stated that regulators “need to focus more on” cryptoasset business operators and that firms would be “closely monitored” in the future.
So far, the FIU has granted full operating permits to only two exchanges: Korbit, the nation’s first trading platform, and Upbit, the market leader, with applications from rivals Bithumb and Coinone still pending. The rest of the country’s once-thriving exchange industry has been forced to close or offer crypto-only trading.
According to critics, the government and regulators have allowed a four-company “monopoly” or “oligopoly” to emerge, killing off promising, innovative firms in the process.
However, Kim dismissed such criticism, reportedly saying:
“Concern about monopolies is a natural phenomenon that arises during the implementation of a new system.”