The South Korean government is preparing a bill to amend the Act on Regulation of Similar Reception, effectively banning all cryptocurrency transactions—including Bitcoin—unless they occur through exchanges that satisfy six specific conditions. According to Money Today, the draft defines virtual currency transactions as "similar receiving behavior" and prohibits them outright, covering “storing, managing, acquiring, exchanging, trading, arranging, arbitrating, and issuing virtual currency.”
Bill Background
The amendment aims to "protect good traders and establish a sound financial order by regulating Similar Receiving Behaviors." In a statement to Reuters, Bithumb—South Korea’s largest Bitcoin exchange—commented, "A right set of regulations will rather nurture the (virtual currency) market, and we would welcome that," signaling support for clear rules. Notably, initial coin offerings (ICOs) remain banned in the country.
The Six Mandatory Conditions
Recognizing the high volume of crypto trading already taking place, regulators have carved out a legal pathway for exchanges that meet all six conditions, with additional requirements to be specified by presidential decree. The conditions are:
1. Segregation of customer funds – exchanges must keep client money separate from their own. 2. Full disclosure of investment risks – users must receive thorough explanations before trading. 3. Real-name verification – customers’ identities must be confirmed. 4. Robust anti-money laundering (AML) system. 5. Asset protection mechanisms, such as cryptographic key dispersion. 6. Increased transparency through public disclosure of transaction details.
Heightened Penalties
The bill also strengthens the existing penal clause. Under current law, violations of the Similar Receiving Behavior Act carry a maximum of 5 years in prison or a fine of 50 million won. The proposed amendment raises this to 10 years in prison or a fine of up to 500 million won (approximately $50,000 USD). The government had first hinted at these increased penalties in October 2017, as reported by Bitcoin.com.
Industry Reaction and Outlook
The bill is expected to be submitted to the National Assembly soon. To ease the transition, authorities are considering a six-month grace period after the law is enacted, giving exchanges time to comply. The move is seen as a pivotal step for South Korea, one of the world’s largest cryptocurrency markets. While the strict conditions impose operational burdens, industry leaders like Bithumb view them as a path to legitimacy. As the legislative process unfolds, the global crypto community will watch closely for the final regulatory framework.