The Financial Action Task Force (FATF)’s Travel Rule is now compulsory in South Korea – but critics have decried the nation’s lack of preparedness for the measure.
Two crypto regulatory bodies, the Financial Information Unit (FIU) and the Financial Services Commission (FSC) have told crypto exchanges that they must abide by the rule, which forces so-called virtual asset service providers (VASPs) to share and store information on sender and recipients of crypto transactions worth over around USD 816.
The Travel Rule was included in legislation that promulgated into law in March 2021, but VASPs were given a year-long grace period to implement it.
However, media outlets such as Seoul Shinmun and Hankook Ilbo reported, the FATF’s rule implementation has been fraught with difficulties. Chief among these is the fact that the two platforms being used to share this data are not yet interoperable.
In June last year, the “big four” crypto exchanges – the market-leading Upbit, as well as Bithumb, Coinone, and Korbit, signed a memorandum of understanding (MOU) on joint Travel Rule cooperation in June last year. Just four weeks or so later, however, Upbit walked away from the agreement and announced it would instead use a platform named VerifyVASP, which was developed by its parent company Dunamu’s Lambda256 blockchain subsidiary.
Bithumb, Coinone, and Korbit, meanwhile, continued with the original MOU and co-developed a compliance platform named CODE.
Seoul Shinmun explained:
“The work to link the two systems was planned to be completed before [the March 25 deadline, but was delayed due to technical issues and differences in positions within the industry.”
The “big four” have released a joint statement explaining that an interoperability solution would be “completed on April 24.”
The regulators, for their part, have thus far failed to issue any explanations about how the rule should be enforced.
The same report remarked:
“Although the Travel Rule enforcement is now mandatory, there are no detailed [regulatory] guidelines, so Travel Rule application amounts and withdrawals-related policies currently vary from exchange to exchange.”
Bithumb, for instance, has applied Travel Rule data sharing to all transactions made on its platform, while Upbit, Coinone, and Korbit only apply these protocols to transactions worth USD 816 or above.
Choi Hwa-in, a blockchain industry expert, was quoted as stating:
“Enforcing the Travel Rule in the absence of clear, international standards only increases the risk of the exposure of [clients’] financial information.”
Meanwhile, more South Korean companies in the traditional finance and fintech spheres are moving into the crypto sector – perhaps sensing more favorable regulatory winds ahead with a new President waiting to take over.
Per Newsis, KG Inicis, a firm that specializes in electronic payment solutions, has announced its plans to launch crypto-related business operations.
The firm says it has launched a wholly-owned, special-purpose subsidiary and will seek to obtain a “virtual asset business license” – an indication that it will either seek to launch an exchange or a crypto wallet.