Financial Services Commission sent warning on Monday banning exchanges from dealing with „dark“ coins
All cryptomotes and virtual currencies operating in South Korea will not be able to handle privacy coins from March next year. The country’s leading regulator has issued a warning citing the increased risk of money laundering resulting from the use of private currency as the reason behind the change.
The announcement comes shortly after the changes to the Special Payment Act. The law includes regulations defining the legality of crypto currency in the country. Some of the currencies that will be affected by the series of changes are Monero (XMR), Dash (DASH) and ZCash (ZEC).
The Financial Services Commission has pointed out that these privacy coins and other privacy-focused virtual currencies promote money laundering activities. They represent a major challenge for law enforcement authorities and agencies as they are difficult to track.
In addition to the restriction on privacy currencies, the commission requires all exchanges to implement strict anti-money laundering guidelines and Know Your Customer (KYC) – Know Your Customer. This will help arrest users involved in money laundering or financing terrorism and other criminal companies. Centralized exchanges with fiat support in South Korea are expected to know the personal details of the customers they serve.
The exchanges should also carefully check these details for government identifiers such as identity numbers or passports. Finally, the exchanges must report their operations to the authorities six months after implementation of the policies.
The country’s authorities have already expressed their concerns about „dark“ currencies. The South Korean wing of OKEx had to remove many privacy coins after stipulations by international regulators and recommendations by the Financial Action Task Force.
Several other exchanges have also refrained from dealing with private coins. Currencies like Monero have the ability to hide their transactions – a feature that makes them impossible to trace. Coins can be placed in a digital ledger, but tracking them is difficult due to complex techniques such as ring signatures and mixers.
This is not the case with other crypto coins, such as Bitcoin and Ethereum, whose transactions are open. Authorities can track transactions on their respective networks through encrypted data collection companies. In September, the IRS offered a reward of $625,000 to anyone who could break the privacy currency transactions.