While individuals wait for the new Know-Your-Customer regulations in South Korea, legal minds are yet to understand the effect of the regulations on the country’s privacy protection laws. From all indications, the new KYC laws will affect financial service providers, including cryptocurrency exchanges. They will be required to use social security numbers, which is contrary to privacy laws.
The new KYC laws date back to January 2018 when the government banned anonymous digital currency trading. And ever since then, the government has continually updated its KYC requirements for financial companies. For the digital currency community, these new requirements will take effect from March next year. Meanwhile, their implications on privacy laws have been the subject of debate for legal experts and local news outlets in South Korea.
The new law will use virtual asset service providers, such as digital currency exchanges and Bitcoin wallets, to verify the details (plus personal data) of their users. This data will also include users’ security numbers.
Personal Information Protection Act in South Korea
While the new law permits access to users’ personal information, the PIPA in South Korea counters that. The Personal Information Protection Act prohibits local firms from legally requesting the social security numbers of their customers except on rare occasions. The law, however, lays out special circumstances under which a financial service provider may ask for these security numbers. An example of such a circumstance is when the customer is making a huge transaction.
Going further, a local financial analysis institute claims that collecting social security numbers is the best possible way of minimizing money laundering by crypto exchanges. However, the privacy protection laws contradict these regulations. Hence, South Korea still has a long way to go before they find a sustainable solution that eradicates crime while still protecting the privacy of customers.
In all, 2020 has been a tough year for exchanges in South Korea. Reports from CoinGeek reveals that Bithumb is now up for sale. Bithumb was one of the earliest exchanges in the world. It has also periodically topped the spot as the largest exchange in the world. But after a series of chaos, news outlets report that the exchange is up for sale for $430 million. In addition to that, Coinbit, another exchange in South Korea was also raided by the Seoul Police last month. The invasion was due to market manipulation allegations on the exchange.