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- Scope of VASPs still vague after amendment of Specified Transaction Information Act.
- Cyrpto businesses providing multi-sig technology may or may not fall within the scope of VASPs defined by Korean law.
Multi-sig(Multisignature) technology refers to the requiring of multiple keys to authorize a cryptocurrency transaction, rather than a single key. Many crypto wallet service providers provide this technology due to its high level of security. Two or three keys are needed to authorize cryptocurrency transaction instead of one. The service provider and the user usually split the keys. For a hacker to make a cryptocurrency transaction, he needs to hack all three keys—which makes hacking very less likely. Virtual assets service providers that deals with custody, administration of user assets, wallet service for companies use this multi-sig technology most frequently.
Are service providers who provide multi-sig technology a VASP by Korean law? If you fall under the scope of VASPs by Korean law an ISMS certificate is required, and a range of other information needs to be reported to the KoFIU. (For more information click here.) Enforcement of the amended law is to be enforced this year March(March 25, 2021). Companies conducting crypto businesses in Korea are getting ready for this change in legal environment. However, the KoFIU recently announced that it will define VASPs as those who have independent control over private keys.
“The KoFIU recently announced that the it will define VASPs as those who have independent control over private keys.”
Therefore, questions arise as to which crypto firms will fall under the scope of Korean VASPs. Therefore, it is necessary for crypto firms who are conducting or will conduct cryptocurrency business in Korea to get legal advise. Cha & Kwon Law Offices strongly advise crypto firms to prepare for the forthcoming change as firms that fail to comply with AML obligations may be subject to civil and/or criminal charges.
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Background info: The KoFIU is the primary government agency coordinating Korea’s AML and CFT policy. On March 24, 2020 the Act on Reporting and Using Specified Financial Transaction Information(the “Specified Financial Information Act”) was amended. The amendment defines cryptocurrency as a “virtual asset” and requires virtual asset service providers(VASPs) to adhere to AML obligations. (For an outline of the newly amended Specified Financial Information Act redirect here.) |
Should you have any questions on conducting crypto business in Korea, please contact Cha & Kwon Law Offices.
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