KoFIU delaying registration decision on Paycoin's PayProtocol

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KoFIU delaying registration decision on Paycoin's PayProtocol

Paycoin price chart [COINMARKETCAP]

Paycoin price chart [COINMARKETCAP]

 
Financial regulators are delaying their decision on registering PayProtocol as a virtual asset service provider.
 
All virtual asset service providers, including crypto exchanges, have to register with the Korean Financial Intelligence Unit (KoFIU) in Korea.
 
"We were operating as a crypto wallet operator, but we were asked to be registered as a virtual asset service provider," said Lim Se-ri, a spokesperson for Danal, which owns PayProtocol.
 
On July 7, the KoFIU decided to delay its decision on the registration.
 
The regulators have been upping their surveillance of cryptocurrencies and related service providers since the dramatic collapse of Luna and TerraUSD, which were run by a company registered in Korea.  
 
Paycoin, which was operated by PayProtocol, can be used to settle bills at about 70,000 retail locations, including GS25, Pizza Hut and KFC. The uptake has been fast as big discounts were offered to users of the coin.
  
Its market cap stood at $89.6 million on Wednesday.    
 
The KoFIU said PayProtocol needs to employ a real-name transaction system to be registered as a virtual asset service provider. In a real-name transaction system, the beneficiary owner is known and identified to prevent anonymous transactions and money laundering.
 
PayProtocol must comply with the money-laundering regulations to run a service that converts Paycoin into won, the financial authorities said.  
 
At the core of their concerns is the chance of price manipulation. PayProtocol issues and distributes Paycoin, which means it is possible for the company to control supply and demand of the coin, ultimately affecting its price.  
 
Paycoin traded at around 34 cents on Wednesday, according to CoinMarketCap. 
 
A screen capture of Pay Protocol website [SCREEN CAPTURE]

A screen capture of Pay Protocol website [SCREEN CAPTURE]

 
"Since the Terra incident, regulators are very worried about payments using crypto," said regulatory source. "The decision was delayed because there is a risk element to PayProtocol's business structure, and the document we requested was not submitted."
 
Another source from a regulator said, "unlike other prepaid electronic payment means, Paycoin does not have any device to protect the coin holders and stores. We're watching closely because damage could be huge if its value collapses."
 
"It's incomprehensible for PayProtocol to try to function as Paycoin's central bank and raise 1.5 trillion won ($1.2 billion), when Kosdaq-listed Danal's market cap is 512.3 billion won," said Park Sun-young, an economics professor at Dongguk University. She added the company should not stick to the current business structure.  
 
"We're communicating with the authorities to find a consensus and are also negotiating with banks for the issuance of real-name accounts," said a spokesperson for PayProtocol. "Outside Korea, Mastercard, Visa and Paypal already started expanding to the crypto payment business, and we believe the authorities will be persuaded once the time comes."
 
 
 
 
 

BY SONG SEUNG-HWAN, JIN MIN-JI [jin.minji@joongang.co.kr]
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