KoFIU Accepted PayProtocol’s VASP Registration Report (Updated 2022.05.) 

[Executive Summary]  

On April 15th , Korea Financial Intelligence Unit (KoFIU) accepted the Virtual Asset Service Provider (VASP) registration report of PayProtocol AG(hereinafter “PP”). PP, the corporation which issued Paycoin(PCI), enables users to utilize their PCI for purchasing goods and services in the affiliated stores. PP reported itself as a Wallet Service provider of the VASP. However, KoFIU also decided that Danal Corp., Ltd. (DANAL) which is the parent company of PP, and Danal Fintech Corp. (DANAL FINTECH), another subsidiary company of DANAL should report themselves as VASPs as well, because those companies seem to participate in the Paycoin payment process.  

A. Business model of Paycoin  

PayProtocol AG(PP), located in Switzerland, is the company that issued Paycoin token(PCI)  and is a subsidiary company of DANAL. DANAL is the parent company of DANAL FINTECH which is assumed to be the actual operative company of PP. PP provides services which enable users to store their PCI in the ‘Paycoin App’. Users can utilize their PCI issued by PP for purchasing goods and services in the affiliated stores. At the very moment for a user to try to make a payment, the sales agreement is made between user’s PCI and KRW with the corresponding value amount. At the same time, PCI is transferred from the user’s wallet to the PP’s wallet and the user’s receivables for above sales are transferred to DANAL. After the payment process is completed, DANAL FINTECH will pay the consented amount of KRW to the affiliated stores in accordance with the premade contract between the stores and DANAL FINTECH.  

B. Acceptance of Paycoin’s VASP Report  

PP received ISMS certificate and filed a report as a VASP business. Korea Financial Intelligence Unit (KoFIU) accepted the report on April 15th, 2022. However, KoFIU announced that not only PayProtocol, but also its parent company DANAL and its supposed operator DANAL FINTECH also need to be filed as VASPs because both companies transact virtual asset for its customers. It seems that KoFIU considered PP as virtual asset wallet service provider under the Act on Reporting and Using Specified Financial Transaction Information. It seems that because both DANAL and DANAL FINTECH somehow participate in the process of PCI, which is used for payment during the distribution process, KoFIU have decided to consider both corporates as Virtual Asset Trader that transact virtual asset for its customers.  

Accordingly, to make DANAL and DANAL FINTECH not to handle virtual assets, it is announced that PP changed its business model to directly operating the role of the above two companies. 

Because this acceptance shows the regulation authorities’ willingness to broaden the scope of the legal definition of VASPs in Korea, corporations that operate businesses related to virtual assets should keep a close eye on regulation changes and check if their business models fall under the legal definition of VASP.