"Registration Barriers Raised for Virtual Asset Service Providers"... FIU Unveils New Registration Manual to Industry

Special Act Amendment to Take Effect on August 20

Major Shareholders Now Subject to Legal Compliance and Credit Review

With the impending implementation of the revised Act on Reporting and Using Specified Financial Transaction Information (hereinafter ‘Special Act’), the financial authorities have notified the industry of updated requirements for virtual asset service provider (VASP) registration. The main changes include strengthened fit-and-proper reviews for major shareholders and the mandatory domestic operation of IT systems.

On August 13, the Financial Intelligence Unit (FIU) under the Financial Services Commission, together with the Financial Supervisory Service, held an “Explanatory Session on the Revised VASP Registration Manual” at Dreamplus Gangnam in Seoul in the afternoon. With the amendment to the Special Act set to take effect on August 20, the session was organized to introduce the new manual to the industry.

Jusik Ha, Director of Policy and Institutional Operations at the FIU, stated, “To maintain trust in the virtual asset market, it is essential to rigorously examine and review the soundness of both the operators and the major shareholders at the entry stage. The amendment to the Special Act is in line with the regulatory trends of major countries, including the Financial Action Task Force (FATF) standards, the European Union’s Markets in Crypto-Assets Regulation (MiCA), and ongoing discussions on the Clarity Act in the United States.”

The amended registration manual now requires verification of legal compliance history, financial status, and social credit for a broadened scope, extending from the existing operators, representatives, and executives to also include major shareholders. Major shareholders encompass not only the largest shareholder and other key shareholders but also special related parties of the largest shareholder. When the largest shareholder is a corporation, the reporting requirements additionally apply to the corporation’s largest shareholder and representatives.

The manual also details specific methods for verifying each review criterion. In the assessment of financial soundness, customer deposits and similar amounts must be deducted from total liabilities when calculating the debt ratio, and the adjusted liability total reflecting this must be separately stated in the application. Social credit review covers the credit default history of the operator and major shareholders, whether they are designated as insolvent financial institutions, and the elapsed period since any suspension of business activities.

Compliance system disclosure items—including organizational structure, personnel, IT systems, and internal controls—have now been included as grounds for possible denial of registration. For organizational and personnel requirements, the FIU will verify that at least four staff members are dedicated to anti-money laundering work and that a compliance officer is designated; dual roles may be permitted depending on business type, organizational scale, and staffing conditions. For IT infrastructure, requirements specify that security and backup facilities, as well as systems handling unique identifiers or personal credit information, must be located in South Korea. If cloud services are used, servers must likewise be domestically hosted.

Changes have also been made to the change notification system. Notifications regarding major shareholder changes and compliance systems, formerly made within 14 days after the change, must now be filed voluntarily at least 30 days in advance.

The new manual also establishes criteria for determining whether non-custodial wallets are subject to registration. Businesses engaged in the storage or management of virtual assets for commercial purposes are required to register; however, if a business does not have exclusive authority over private keys, it may be exempt from registration. Whether a business has exclusive management rights is determined by criteria such as whether it can solely transfer virtual assets or arbitrarily create, recognize, or decrypt private keys.

The FIU and the Financial Supervisory Service plan to publish materials from the explanatory session on their respective websites. An FIU official commented, “With these institutional reforms, we expect a more reliable market to be established by ensuring the soundness of major shareholders and strengthening anti-money laundering capabilities at the entry stage for virtual asset service providers.”

This content was produced with the assistance of AI translation services.