Bithumb Partners with Chainalysis to Increase Transaction Verification

Bithumb Takes Its Fight Against South Korea’s Withholding Tax to Court  

Popular cryptocurrency exchange Bithumb has announced that it will be partnering with blockchain analysis and data platform Chainalysis to help track activities on its platform.

In a press release published earlier this week, the top exchange explained that their alliance would see it employ Chainalysis’ Reactor investigations tool to perform Anti-Money Laundering (AML) due diligence on its platform.

Making Changes to Ensure Operational Stability

Thanks to the implementation of the Reactor, Bithumb explained that it would be able to comply with the Special Financial Transactions Information Act – a new law that was passed in the exchange’s home country of South Korea.

Last week, the South Korean National Assembly passed a revised version of the Act, which governed the use and reporting of special financial transaction information, especially concerning crypto exchanges and other virtual asset providers. As the law dictates, virtual asset operators will now be compelled to report their operations to the Financial Intelligence Unit (FIU) under the Financial Services Commission, after they get “real name-confirmed accounts” from commercial banks across the country.

Any exchange caught in violation of this requirement will be made to pay up to 50 million won (about $42,000 at the time) in penalties, while top executives and officials could also be handed a maximum of 5 years’ jail term.

The bill is set to be implemented in March 2021, although it already calls for exchanges to meet the requirements for real-name accounts and ISMS authentication, as well as to report their operations within six months after the law gets implemented.

Regardless of the seemingly extended window of implementation, however, Bithumb is hoping to get ahead of the curve, thus ensuring that it stays operational, even if regulators and lawmakers in South Korea decide to place additional restrictions on the country’s crypto space and the operations of exchanges 1in the near future.

In its announcement, Sungmi Lee, Bithumb’s Head of Compliance, explained that they believe some additional restrictions are imminent. “We anticipate further updates following last week’s vote making it even more important for us to have support available in our local language,” he explained.

Not the Best Time for Government Confrontation

Bithumb already had a run-in with the South Korean government over a tax bill, and it seems evident that the exchange won’t be willing to draw Seoul’s ire even more.

Earlier this year, the exchange confirmed that it will be litigating an 80 billion won (about $70 million) tax bill that was imposed on it by the National Tax Service (NTS), explaining that the bill was groundless since the country still hasn’t recognized cryptocurrencies as a legal form of money.

Last year, the NTS imposed a retention tax – an income tax that the government collects from the payer of an income, as opposed to the income’s recipient – on Bithumb, forcing the exchange to pay the bill before giving the remaining income to its customers. At the time, the tax authority explained that gains gotten from foreign accounts on Bithumb also count as taxable income, and it has the right to request taxes from the exchange.

However, the exchange has now taken the fight to court, with the South Korean tax tribunal currently in the middle of a 90-day consultation period that will determine whether it would grant or dismiss Bithumb’s claim.

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      Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.