Korean Banks Introduce New Virtual Asset Guidelines For User Protection

Key Points:

• Korean Federation of Banks implements “Virtual Asset Real-Name Account Operation Guidelines” to protect virtual asset users and combat money laundering.
• Virtual asset exchanges mandated to accumulate 3 billion won in reserves to cover damages to users.
• Enhanced customer identification, transaction monitoring, and reporting of suspicious activities to be conducted annually to strengthen security measures.

According to News1, the Korean Federation of Banks revealed its latest initiative aimed at safeguarding virtual asset users and strengthening anti-money laundering efforts.

The newly formulated “Virtual Asset Real-Name Account Operation Guidelines” emerged from extensive consultations with financial authorities and virtual asset exchanges, marking a significant step towards enhancing security and transparency in the cryptocurrency realm.

One of the key provisions in the guidelines stipulates that virtual asset exchanges must maintain a substantial reserve of at least 3 billion won (~ $2.3 million) to be held liable for any potential damages experienced by their users. This move comes as a protective measure in the event of unforeseen circumstances, such as hacking incidents or computer failures. The reserve requirement is calculated based on up to 30% of the daily average amount of deposits made into the virtual asset operator’s account during the preceding year, with a maximum limit of 20 billion won (~ $15.7 million).

Furthermore, additional authentication measures will be implemented during the collection and transfer of funds. Transactions that remain inactive for an extended period will face restrictions on collection and transfer actions, ensuring greater security for users’ funds. To manage deposit and withdrawal activities efficiently, user accounts will be categorized into two types: limit accounts and regular accounts, each with its own specified limits.

The revised guidelines also focus on stringent anti-money laundering practices related to real-name accounts. Financial institutions are mandated to conduct enhanced customer identification procedures annually for real-name account users. This enhanced due diligence (EDD) process involves not only verifying the user’s identity information but also scrutinizing additional details regarding the purpose of the transaction and the source of funds. Moreover, there will be an intensified focus on identifying high-risk users and promptly reporting suspicious transactions.

In addition to strengthening anti-money laundering measures, the new guidelines establish robust protective measures for user deposits. Standards concerning separate deposit procedures, deposit daily ambassador limits, and deposit due diligence have all been carefully restructured to ensure comprehensive security and prevent potential vulnerabilities.

To expedite the implementation of these vital measures for user protection, virtual asset exchanges are required to accumulate the prescribed reserves starting as early as September. Additionally, the meticulous preparation of work procedures and the establishment of a robust computer system will be carried out in a phased manner, with completion slated for March of the following year.

As Coincu reported, South Korea’s Financial Services Commission (FSC) is making great gains in cryptocurrency regulation by implementing a stablecoin regulatory environment and a virtual asset disclosure system. The move is part of the country’s efforts to strengthen investor safety and improve control of the fast-developing virtual asset market.

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