The Need to Allow Virtual Asset Trading for Corporations and Foreigners
Current Situation of Virtual Asset Trading in Korea
In Korea, virtual asset trading requires the use of real-name accounts linked to banks, following Know Your Customer (KYC) verification. Customers must deposit Korean won (KRW) into these accounts to trade virtual assets on exchanges.
However, the current system imposes significant restrictions:
- Only one bank can be linked to a single exchange, preventing customers from using other banks for KRW deposits and withdrawals.
- Corporations and foreigners are prohibited from opening accounts on virtual asset exchanges, even though they can open bank accounts. This restriction is guided by financial authority policies but lacks clear legal justification.
Legal Framework Supporting Corporate and Foreigner Accounts
Under Korea's Act on Reporting and Use of Specified Financial Transaction Information (Specific Financial Information Act):
- Articles 5-2 (Customer Due Diligence) and 5-3 (Information Provision Obligations) presuppose that corporations and foreigners can open accounts for virtual asset transactions.
- Virtual asset service providers (VASPs) are classified as "financial institutions," but there is no legal basis for excluding corporations and foreign customers from opening accounts.
This disparity between legal provisions and financial authority guidelines has created a practical bottleneck for businesses operating in Korea’s globally significant virtual asset market.
Implications of the Ban
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Practical Challenges for Businesses Korean companies engaged in global virtual asset projects require corporate accounts for operational purposes. Due to the prohibition, many corporations manage virtual asset funds through personal accounts of representatives or financial officers. This practice:
- Blurs the distinction between personal and corporate funds.
- Increases the risk of embezzlement and other legal liabilities within the organization.
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Absence of Legal Justification While the Specific Financial Information Act supports the inclusion of corporations and foreigners as virtual asset customers, the prohibition by financial authorities:
- Lacks a clear legal foundation.
- Contradicts the intent of existing regulations designed to enhance transparency and compliance.
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Potential Negative Outcomes
- The ban drives corporations to seek alternative, less transparent methods of managing virtual assets.
- By not addressing the issues arising from this prohibition, financial authorities risk encouraging greater illegal activity, such as money laundering, rather than mitigating it.
Recommendations
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Policy Revision
- Instead of an outright prohibition, financial authorities should adopt policies that address specific concerns, such as anti-money laundering (AML) and investor protection.
- Strengthen compliance requirements for corporate and foreign accounts rather than banning them altogether.
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Clear Regulatory Guidelines
- Establish transparent and consistent rules for corporations and foreigners wishing to engage in virtual asset trading.
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Enhanced Monitoring and Reporting
- Implement robust monitoring mechanisms to prevent misuse while ensuring legitimate corporate and foreign users can access virtual asset markets.
Conclusion
Banning corporate and foreign accounts for virtual asset trading does not address the root causes of potential risks and instead creates new problems, including internal legal liabilities and financial inefficiencies. Korea’s global role in the virtual asset market demands proactive and legally grounded solutions that balance compliance with economic innovation. The focus should shift from prohibition to regulation, ensuring the market's integrity while enabling fair access for all participants.
