December 28, 2017, the Korean joint task force on cryptocurrency, consisting of
various governmental agencies including the Office for Government Policy
Coordination, Financial Supervisory Commission, the Ministry of Justice and the
Ministry of Strategy and Finance, among others, announced that it will continue
its implementation of its previously announced emergency measures on December
13, 2017 (for more information, please see BKL’s 12/14 newsletter), and in
addition take the following actions.

  1. Prohibition on the provision
    of banking services to non-compliant cryptocurrency exchanges

    On December 13, 2017, the Korean government announced
    emergency measures in response to the increasingly speculative domestic
    cryptocurrency market, including restrictions on the participation of minors,
    foreigners and financial institutions on domestic cryptocurrency exchanges
    (each, an “Exchange”).
    On December 28, 2017, the Korean government stated that
    it will further instruct domestic financial institutions to refrain from
    providing remittance services to Exchanges that are found to be in violation of
    the above restrictions. This is intended to ensure the Exchanges’ compliance
    with such restrictions, failing which a non-compliant Exchange’s ability to
    operate would be compromised.
    Furthermore, the Korean Fair Trade Commission and other
    relevant governmental agencies may conduct on-site inspections of the Exchanges
    in order to verify their compliance with the consumer protection regulations as
    well as to ensure the adequacy of the IT and security systems maintained by an
    Exchange. Violations will be reported to the Exchange’s bank, which would then
    consider the suspension of remittance services to the Exchange.
  2. Closure of Exchanges
    The Ministry of Justice has proposed the establishment of
    a “special law” which would grant the Korean government the ability to order to
    closure of an Exchange.
    However, we note that the particulars of any such
    “special law” have not been determined and no draft legislation or proposal has
    yet to be made. The government is in the process of deliberating the merits and
    necessity of a “special law” and consequently, we cannot state when any such
    “special law” would be enacted or in what form, if at all.
  3. Enhancement of Personal
    Identification Procedures

    The Exchanges currently provide each user (or customer)
    with a “virtual” bank account held under the name of the Exchange. Any deposits
    or withdrawals made by a user are typically made from the user’s bank account
    to the user’s “virtual” bank account held by the Exchange.
    This meant that the user’s bank account and the user’s
    “virtual” bank account could be maintained at separate banking institutions,
    and due to this discrepancy, the bank of the “virtual” account would have
    limited access to the user’s personal information.
    Previously on September 9, 2017, the Korean government
    had issued guidelines instructing domestic banking institutions to refrain from
    processing deposits or withdrawals to Exchanges for users whose personal
    identity could not be verified. On December 28, 2017, the Korean government has
    taken the additional step of prohibiting the practice of utilizing “virtual”
    bank accounts. In the future, in order to access an Exchange, a user must
    maintain a bank account in their name, at the same bank as that of the
    By requiring the “sameness” of the bank accounts of the
    user and the Exchange, the Korean government seeks to ensure that banking
    institutions utilized by the Exchanges have greater access to a user’s personal
    information as well as transaction history. This would facilitate the banks’
    compliance with the verification of personal identity requirements as well as
    increase their ability to detect any non-compliance with the age and
    nationality restrictions and illegal or fraudulent activities, such as money
    The Korean government will provide further details,
    including how “virtual” bank accounts for existing users, will be transferred
    to new bank accounts at a later date.
  4. Online Marketing

    The Korean government has stated its intention to implement certain voluntary
    measures to limit the Exchanges’ online marketing and advertising activities,
    such as through portal websites. In addition, the Korean government emphasized
    its intention to strictly enforce cryptocurrency related regulations and punish

This update is intended as a summary news
report only, and not as advice. For legal advice, please inquire with your
contact at Bae, Kim & Lee LLC, or the following authors of this bulletin:


T 82.2.3404.0143

E sky.yang@bkl.co.kr

Jae In

T 82.2.3404.6537

E jaein.lee@bkl.co.kr

Soohyun JOO

T 82.2.3404.0277

E david.joo@bkl.co.kr

Yeong IM

T 82.2.3404.7640

E Bae, Kim & Lee LLC