Newsletter
Requirement for Cryptocurrency Trading Platforms to Adopt Real-Name System
On July 27, 2018, the Financial Supervisory Commission (FSC) issued a letter (金管銀法字第10702729040號) to all banks indicating that in order to avoid money laundering and financing of terrorism activities, they should pay attention to the issue regarding the conversion of cryptocurrency into fiat money. Moreover, in the letter, the FSC proposed that the following principles to be complied with by all banks when the banks accept cryptocurrency trading platforms as customers and the FSC further requested the bankers association to contemplate the implementation rules for these principles.
1. Know your Customers (KYC): Banks should distinguish whether a customer is a cryptocurrency trading platform or not.
2. Adopting a real-name system: All cryptocurrency trading platforms and the platform users should implement a real-name system for cryptocurrency transactions in the future.
3. If a customer is a cryptocurrency trading platform, banks should list it as a high-risk customer and banks should file a suspicious activity report when they detect a suspected money laundering transaction or terrorism financing activity.
4. If a cryptocurrency trading platform is reluctant to adopt a real-name system or its business model might be unlawful, then banks are entitled to reject the trading platform's request for opening an account.
At present, some domestic convenience stores accept cash payment for the cryptocurrency purchased by consumers on the trading platforms. However, the FSC believes that this channel may become a loophole for money laundering prevention. Therefore, the FSC is requiring the trading platforms and platform users to adopt a real-name account system; in other words, the fund flow of transactions in relation to cryptocurrency should be carried out through real-name accounts with banks in order to eliminate direct cash payment and to strengthen money laundering prevention.
The FSC's current attitude toward supervision of cryptocurrency mainly focuses on anti-money laundering, which infers that the FSC is trying to avoid adverse impact on the international anti-money laundering assessment to be conducted in November 2018 due to the lack of supervision on cryptocurrency. In addition, there are still different views on whether the FSC or the Ministry of Justice should be the government agency in charge of cryptocurrency. Given that an international anti-money laundering organization, the Financial Action Task Force on Money Laundering (FATF), will hold an international meeting in September to discuss how cryptocurrency should be regulated, the question regarding which government agency should oversee the regulation of cryptocurrency will be determined after the FATF meeting.