Virtual Asset Exchanges Still Burdened by Amended Special Financial Transaction Act

Even with some relaxation of the enforcement decree amendment to the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Transaction Act), virtual asset exchanges are expected to continue facing difficulties. This is because they will move away from the current system of reporting suspicious transactions based on a uniform monetary standard set by the authorities, and will instead be required to independently identify high-risk transactions and bear responsibility for those judgments.

The Financial Intelligence Unit (FIU) has recently been reviewing ways to adjust certain parts of the amendment to the Special Financial Transaction Act's enforcement decree and supervisory regulations, having gathered opinions from the virtual asset industry. The FIU is considering a direction to ease the uniform Suspicious Transaction Reporting (STR) obligation, which will require exchanges to establish their own standards and grounds for judging high-risk transactions.

In the future, exchanges may be subject to inspections by the FIU to assess the appropriateness of their judgment systems. The policy to expand the scope of the travel rule to transactions below 1 million won will be maintained. Consequently, the burden of processing small-value, high-volume transactions, as well as the costs for personnel and IT investment, may increase for each exchange.

This amendment is closer to a shift in regulatory method rather than a deregulation. The focus has moved from the authorities setting a uniform standard for reporting to relying on the risk assessment capabilities of each exchange. In a risk-based management approach, it becomes crucial to document which transactions were considered high-risk by the exchange, based on what criteria transactions were held or reported, and the extent of the grounds for such judgments.

Bithumb has made anti-money laundering (AML) and user protection its core operational priorities, strengthening related personnel and systems. The company plans to enhance its AML and travel rule response framework in line with regulatory changes. Korbit stated it will respond according to the finalized legal provisions and plans to upgrade its system prioritizing user protection and strengthening internal controls. Applying securities firm standards may also be considered if necessary.

Large exchanges like Upbit and Bithumb, with their substantial trading volumes and revenue bases, can relatively absorb the costs of AML personnel and IT investments. Smaller exchanges with lower trading volumes will find it difficult to avoid the burden of system upgrades, adopting external solutions, and securing internal control personnel. Exchanges collectively emphasized the importance of building and enhancing systems tailored to each business's characteristics and risk levels.

Coinone faces the dual challenge of managing internal controls and overseas business partner risk management following its investment rounds from Korea Investment & Securities and OKX Ventures. While some exchanges deferred their responses, citing that the amendment has not yet been finalized, the direction is becoming clear, and the scale of future burdens will be determined by each exchange's AML management capabilities and internal control levels.

The amendment to the Special Financial Transaction Act's enforcement decree cannot be viewed as simple deregulation for exchanges. While the burden of uniform reporting may be reduced, the structure where exchanges must directly judge and take responsibility for high-risk transactions has become clear. AML capacity, including capital, IT investment, internal controls, and external partnerships, will be the criteria that determine exchanges' survival in the future.