Virtual Asset Industry: "Field Confusion Expected If All Transactions Over 10 Million Won Are Reported"

Virtual Asset Industry: "Field Confusion Expected If All Transactions Over 10 Million Won Are Reported"

DAXA Submits Opinion to Ministry of Government Legislation Regarding Amendment to Enforcement Decree of Special Financial Transactions Information Act

Reluctance to Impose Customer Information Verification Obligation

Domestic virtual asset businesses have submitted an opinion stating that "field confusion is expected" regarding the amendment to the Enforcement Decree of the 'Act on Reporting and Using Specified Financial Transaction Information' (Special Financial Transactions Information Act), which was pre-announced for legislation in March.

In particular, concerns were raised that virtual asset businesses would not only have to report all transactions exceeding 10 million won but also bear the obligation to verify accuracy in addition to the existing customer identification obligation.

According to the virtual asset industry on the 3rd, the Digital Asset eXchange Alliance (DAXA) submitted an opinion with such content regarding the amendment to the Enforcement Decree of the Special Financial Transactions Information Act and the 'Reporting and Supervision Regulations for Specified Financial Transaction Information' through the Ministry of Government Legislation's National Participation in Legislation Center on the 29th of last month.

This opinion reflects the views of 27 virtual asset service providers (VASPs) registered in Korea, including the five major virtual asset exchanges (Upbit, Bithumb, Coinone, Korbit, and Gopax).

DAXA stated that while it agrees with the purpose of the amendment to solidify the domestic anti-money laundering (AML) system, some amended provisions contain obligations not present in the Special Financial Transactions Information Act, exceeding the scope of delegation by law, and include discriminatory elements compared to other financial sectors.

Specifically, it stated that deeming all virtual asset transactions exceeding 10 million won as suspicious transactions and requiring virtual asset businesses to report suspicious transactions (STR) to the Financial Intelligence Unit (FIU) violates the principle of legal reservation.

The current Special Financial Transactions Information Act imposes the obligation to report suspicious transactions only when there is reasonable grounds and leaves this judgment to financial companies, but the enforcement decree amendment, etc., goes beyond specifying judgment criteria to create new reporting obligations.

DAXA also explained that according to the amendment to the enforcement decree, the number of suspicious transaction reports from the five major virtual asset exchanges would increase 85 times from the existing 63,408 cases to 5,445,133 cases based on last year's figures, making the situation realistically difficult.

Regarding the imposition of customer identification information verification obligations on virtual asset businesses, it was argued that while the Special Financial Transactions Information Act only requires customer identity verification, the enforcement decree, a subordinate regulation, adds a separate phased obligation of "verification."

It further argued, "Violation of customer identification obligations is a reason for disciplinary action such as fines for other financial industries, and for virtual asset businesses, it can lead to business suspension," claiming that imposing a verification obligation not present in the higher law also exceeds the limits of delegated legislation.

In addition, opinions included the need for supplementation regarding ▲ the unfairness of major shareholder eligibility judgment compared to other financial sectors ▲ the absence of clear criteria for assessing the risk of overseas businesses.

This amendment to the Enforcement Decree of the Special Financial Transactions Information Act is expected to be pre-announced for legislation and regulation changes until the 11th, and then finalized in July after review by the Regulatory Reform Committee and the Ministry of Government Legislation, and approval by the Cabinet meeting.

Among these, regulations that define detailed matters delegated by the Special Financial Transactions Information Act, once amended, will take effect on August 20. Other provisions of the amendment to the enforcement decree and supervisory regulations are scheduled to be implemented sequentially from January to August next year.