A man is reflected on a screen showing exchange rates of cryptocurrencies at Bithumb virtual currency exchange in Seoul on June 20, 2018. Photo: AFP

The South Korean cryptocurrency sector has a legal headache.

As the government makes preparations to implement know-your-customer (KYC) and anti-money laundering (AML) compliance processes, legal experts have raised concerns about their incompatibility with existing laws.

The new requirements for cryptocurrency exchanges would contravene the existing Personal Information Protection Act, which stipulates that local firms cannot legally ask clients for their social security numbers, Cointelegraph reports, citing coverage by Digital Today.

The measures also cover financial institutions, but they are permitted to request it under exceptional circumstances, such as for major banking transactions.

The Enforcement Decree of the Special Payment Act is expected to come into force in March 2021 and will require “virtual asset services providers” to confirm the real names of customers by verifying them against personal data such as social security numbers.

The Financial Information Analysis Institute (FIAI) addressed the ambiguity in the upcoming AML-KYC bill on crypto exchanges in a note, arguing that because an exchange exists exclusively on the internet it is more than just a financial institution – it is comparable to a “mail-order seller like an internet shopping mall.”

“It does not mean that virtual asset operators are given the status of financial business operators or incorporated into institutional financial companies through the enforcement of the revised special money law,” said the FIAI.

Local legal experts specializing in crypto said that due to the ambiguity of the upcoming new AML-KYC compliance measures, “there is still a long way to go, even if such content is included in the Virtual Asset Business Rights Act.”

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