[Korea DeFi Roadshow] Kang Byeung Jin, Attorney of Hashed says “Specific Financial Transaction Information Reporting and Use law lacks understanding of blockchain technology”

Byeung Jin Kang, attorney of Hashed, said, “The revised law on Reporting and Use of Specific Financial Transaction Information lacks understanding of blockchain technology.”

On August 25, he participated as a speaker at the “Korea DeFi Road Show,” and made a presentation under the topic of “Korea’s Specific Financial Transaction Information Reporting and Use law compared to overseas legislative cases.” Kang said, “In the amendment to the law, there is no specific mention of important aspect of blockchain technology such as private keys and smart contracts. There are more phrases that it should be mandated by the enforcement decree than the word ‘virtual assets’.”

He also said, “Compared to the overseas cases, there are many things that are disappointing. To understand and support the industry, it is necessary to establish technology-based regulations. The law is a measure to prevent criminal activities such as money laundering and public intimidation financing, not discouraging promotion of cryptocurrency. In order for the blockchain technology to nurture, a separate promotion law is needed.”

Then, the amendments to the law were compared with the FATF recommendations. In the amendment, a virtual asset business entity was refers as a business entity that conducts various activities such as selling, buying, exchanging, transferring, storing, and managing virtual assets. Virtual asset providers recommended by the FATF include not only operators, but also agents, exchanges between fiat currency and virtual assets, means to control virtual assets, and ICO (recruiting initial development funds from a large number of unspecified investors to create new cryptocurrencies. The act of distributing coins in return) includes the issuer, the person who participated in the solicitation and sale of virtual assets, or provided financial services related thereto.

Kang cited the few differences in defining the virtual asset provider between the FATF and that of Korean law : ▲ clarification of the linkage between fiat currency and virtual currency ▲ clear mention of technology such as ICO ▲ legal interpretation of ‘a business owner’ ▲ ‘means that enable control over virtual assets’. He cited the case of France, which is progressive in cryptocurrency regulation.

Unlike the Korea’s law amendment, which was passive in collecting opinions from the industry and the public, France received opinions from more than 600 stakeholders, and 30 implementation proposals were selected and suggested from the public. The “Experimental Plan for Corporate Growth and Innovative Transformation Act” was enacted through a procedure for collecting public opinions conducted online after two months.

The bill has ▲ a’public offering type ICO approval selection system’, which selectively allows visas for issuing ICOs, ▲ a digital asset handling company (similar to Korea’s virtual asset business) authorization selection system. Businesses must select and designate the subject of compulsory registration among the nine types, and they can conduct digital asset sales and consignment business through legal currency. Businesses can form digital asset investment funds and invest 20% of the total amount of venture fund management assets in digital assets.

France’s public offering type ICO visa will be approved within 20 days from the date of receipt of the visa application. A justifiable basis must be provided for the decision to reject approval. If the visa is not approved, the public offering ICO recruitment process cannot be performed. France has created a legal text that legally guarantees account access to make it easier for authorized ICOs to open bank accounts.

Kang said, “Unlike Korea, which hurriedly passed the amendment to the law because of the FATF recommendation, France created a bill based on technology understanding. There are still only two public offering type ICOs approved in France, but I think a case like France with clear regulations is good considering STO (issuing a security token to investors who have ownership of the assets of the company that issued the cryptocurrency), which began to gain reaction in the market after the ICO.”

Later, he commented on the difference in legal interpretation of the “person who runs the business”. The “people who do business” mentioned in the amendment to the Specific Financial Transaction Information Reporting and Use law was first explained by Lee Hae-Bung, deputy director of the Financial Supervisory Service, at a Specific Financial Transaction Information Reporting and Use law seminar held at the National Assembly last month. In the Financial Consumer Protection Act, this means ‘the actions performed in a continuous or repetitive way for the purpose of obtaining profits’. In FATF, virtual asset providers are P2P platforms that focus on personal and interpersonal transactions rather than jobs, individuals who purchase goods or services as virtual assets for themselves, simple software developers, wallet manufacturers, non-storage wallets (non-custom type). Wallet providers are excluded from virtual asset providers.

Kang said, “In light of the FATF’s recommendations, the scope of non-virtual asset business operators under the Specific Financial Transaction Information Reporting and Use law is not clear. In the law, phrases such as “representing a third party” are omitted.” He then explained that the U.S. Monetary Supervisory Service announced last month that the bank’s cryptocurrency consignment service was allowed, and mentioned business areas such as crypto-assets custodial, which is provided in the form of storing private keys of crypto-assets. As the meaning of each word changes according to the law, it is necessary to be careful about every word in the bill. This is a comparison between the law, which has a large range of virtual asset providers, and the overseas cases that accurately classify each technology area.

Kang ended up on that extension and commented on the definition of a means to enable control over virtual assets. He pointed out that the government should “recognize the importance of the difference between storage and non-architect wallet solution providers, and the expression of owning, storing, and transferring virtual assets on the blockchain is not accurate.” He said, “Because virtual assets are intangible assets, they are not really contained in the wallet like real money, but the tokens remaining on the blockchain are recorded, so it must be stated that storing virtual assets means that the investor holds the private key. I think it can be done.”

As an example, he cited the money laundering and public intimidation financing amendments revised by the UK last year. In the amendment, the UK stipulated that virtual asset providers are those that manage customers’ private keys instead and conduct virtual asset deposits, storage, and margin sales.

번역: 김동우 기자