The Upside to South Korea’s Latest Regulation
While those predicting doom and gloom love to proclaim “Korea is banning Bitcoin,” in reality they are setting a regulatory example in requiring all digital currency buyers to follow strict Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines, meaning:
Know Your Customer (KYC) – Starting on Jan 30th, users of Korean digital currency exchanges (including Bithumb and Coinone, two of world’s six largest exchanges) will be required to provide their basic contact information, such as a legal name that matches a verified bank account.
This may seem like a rudimentary step, but there are some exchanges, like China’s Binance, that will allow you to create an account with only a username and withdraw up to two Bitcoin in value per day. KYC information can be compared to government databases to determine whether the user has participated in criminal behavior in the past. They are also looking to exclude foreigners and underage minors from participating in Korean exchanges.
Anti-Money Laundering (AML) – This set of rules will help exchanges monitor commonly used illegal transactions and techniques to determine whether funds from criminal activities are being traded on digital currency exchanges. If those funds are allowed to be traded into digital currencies, they may be made to look like legitimate gains, something governments are trying to avoid.
This may be bad news for those operating illegally on these exchanges, but good news overall for the future prices of digital currencies. These types of regulations could eventually open the door for large institutional investors (banks, venture funds, private equity) to enter the space in a meaningful way. The amount of money entering the market from those institutions should dwarf any illegal activity currently in the market, creating a positive net effect overall.