South Korean Stakeholders Opposes the Proposed "Know-the-Sender" Rule

Some stakeholders are pushing back against the proposed Know-the-Sender (KTS) rule that the South Korean parliament is looking to pass into law.

At a public hearing organized by the Political Affairs Committee of South Korea’s legislature on Tuesday, Choi Hwa-in of the Financial Supervisory Service (FSS) sounded a note of caution that the growing blockchain industry in the nation could be “severely limited” if the KTS proposal is passed into law.

The Know-the-Sender rule was proposed by Kim Byung-wook of the majority Democratic Party and Yoon Chang-hyeon of the People’s Power Party on Oct. 28. Under the provisions of the regulations, anyone, particularly business entities that receive digital currencies, must share the details of the sender, including their names and locations. The rules are further stretched as businesses that send funds to one another must supply the core details of the sending outfit.

The KTS rule is also stretched to foreign-based firms, as they will now be required to register with the South Korean Financial Services Commission (FSC). Cho as well as Yoon Jong-su pushed back against this stance, highlighting the impracticality of the proposal. 

According to the professionals who opposed the bill, the proposal can shut down the digital currency ecosystem, as most foreign virtual asset service providers may not have the requirement to register with the FSC as required.

South Korea tags as a controversial country when it comes to regulating entities providing digital currency services. Despite the long-drawn attempt to tax crypto gains, it is still unclear whether the scheduled timeline of January 2022 will pan out. 

The country’s regulators shut down a number of exchanges back in September, with only Upbit and a handful of trading platforms coming off as the only startups who were able to secure banking partnerships to fulfil the needed requirements. The KTS rule has been tagged as the most unfavourable proposal that can further tighten the Korean cryptocurrency space.