Privacy coins have received a major amount of pushback in recent times, with regulators wary of their possible criminal links. In what might be a trend from now on, South Korea, a leading cryptocurrency hub, has confirmed that it might ban these assets within the New Year.
Earlier this month, South Korea’s FSC [Financial Services Commission] confirmed within a release that it might crackdown against all privacy coins from March 2021. The agency confirmed updates to the Special Payment Act – legislation covering the legality of crypto assets in South Korea.
The new legislation confirms that exchanges and digital asset custodians would be restricted from handling privacy coins since March.
The FSU explained that the action was significantly due to privacy coins’ inherent nature and therefore the difficulty involved in trading them. Calling the assets “dark coins,” the agency explained that they need high risks of association with money laundering and other criminal activities.
With no viable due to trace these assets – that includes Monero, DASH, and ZCash – the FSA is dissociating itself from them entirely.
Besides the ban on privacy coins, the amendments to the Special Payment Act also bring new anti-money laundering [AML] and know-your-customer [KYC] requirements for exchanges. Beyond not handling privacy coins, asset custodians and repair providers would now need to confirm their customers’ real names. All user’s names would wish to be verified against personal data from government records.
All concerned asset custodians would require to send reports of their policy implementations within 6 months of the legislation’s enactment,
The ban is the latest in anti-privacy coin sentiment that appears to be sweeping the cryptocurrency ecosystem. Firms and regulators alike are camping down on the assets, with most hoping to minimize their use in criminal activity.
Earlier in October, a report from the United States Department of Justice alleged that privacy coin holders might be engaging in “high-risk” activity. Titled “Cryptocurrency: An Enforcement Framework,” the report explained that privacy coins could undermine existing AML and counter-terrorist financing [CTF] regulations put in situ by cryptocurrency firms. It cited the standard suspects – Monero, ZCash, and DASH.
“The Department considers the utilization of AECs to be a high-risk activity that’s indicative of possible criminal conduct,” the report added. “AECs are often exchanged for other virtual assets like Bitcoin, which will indicate a cross-virtual-asset layering technique for users attempting to hide criminal behavior.”
Cryptocurrency exchanges have also started cutting access to privacy coins. Earlier this month, Colorado-based ShapeShift delisted the assets listed above. Veronica McGregor, ShapeShift’s chief legal officer, added that the action was due to regulatory concerns. She declined from revealing any plans, merely adding that they weren’t working with the assets for now.
DASH has pushed back against what appears to be a newfound bias against these assets. While adding further, Dash Core chief financial Glenn Austin explained that it all boils right down to an education issue. He also acknowledged the Justice Department’s report, explaining that a lot of exchanges were merely looking to appease the govt.