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[Executive Summary]
- The FIU has demanded PayCoin, the only payment token in Korea, to link real-name accounts with a commercial bank by the end of this year, a measure against potential misuse of the token for money-laundering. It is speculated that the coin will not be able to link real-name accounts realistically within the year.
The possibility of PayCoin, the only payment token in Korea, to collapse and fall apart is growing rapidly, as the FIU recently demanded the coin to be linked to real-name accounts with a bank until the end of this year, a measure against potential misuse of the token for money-laundering. It is speculated that the coin will not be able to link real-name accounts realistically within the year.
According to the virtual assets industry in Korea, the FIU has sent an official letter to PayProtoclAG, the operating entity of PayCoin, demanding protection measures for customers, including real-name accounts from a bank by the end of the year.
PayCoin is a virtual asset issued by PayProtocol, which is an affiliate of Danal. Danal has been planning on enabling purchase of goods and services by PayCoin in over 150 thousand online/offline affiliated member stores.
According to the existing business plan of Danal, if purchasers buy goods from a Danal-affiliated member store by PayCoin, Danal pays cash to the member store and receives the coin from the purchasers. To put it simply, Danal and Danal affiliates are doing A to Z of PayCoin, including issuance, distribution, supply, sales of PayCoin.
The FIU identified a spot in the business structure of PayCoin where abuse of virtual assets such as money laundering could happen when the coin is encashed. If an affiliate of Danal sells PayCoin received from purchasers to a foreign market, etc., it is difficult to track down the cash flow. Therefore, the FIU asked for PayProtocol to have real-name accounts linked with a commercial bank.
In the virtual assets industry, the prevalent view is that Danal will have a hard time securing real-name accounts within the year, since commercial banks have a risk of entering into the business model marked as potentially dangerous of money laundering from the FIU.
As PayCoin is the only payment token in actual use in Korea, the fate of its business model facing the regulation is worth following. It is highly recommended for any businesses handling PayCoin to closely observe the development of the situation since the use and value of PayCoin may be affected by the regulatory authorities’ decisions on the matter. Financial authorities appear to be tightening their grip on the virtual assets market as it builds a more complex relationship with the financial system. The protection and safeguards for investors and market participants are likely to be strengthened in the Korean market.