Korean Regulator Says Banks Must Treat Crypto Exchanges as High Risk

New Orders from Korea FSC make it ‘more difficult’ for smaller exchanges to comply

article-image

Source: Shutterstock

share

key takeaways

  • Korea’s financial regulator mandates exchanges comply with ID verification, AML procedures to maintain license
  • Local industry expert says that authorities have stepped up the tempo in demanding compliance

Tightening regulation of Korea’s anti money laundering rules will mean that smaller exchanges can no longer compete on the market, says one Korea-based digital assets expert. 

The Korea Times reported Sunday that the country’s Financial Services Commission, its financial regulator, said that banks should treat crypto exchanges as “high-risk” clients and be subject to strengthened ID verification requirements and transaction monitoring. Banks will be required to deny services to clients that haven’t onboarded the ID verification requirements, tying every account on their platform to a real, verified name. 

Previously Korea’s regulator had said that exchanges must partner with a traditional bank in order to maintain fiat onramps. By September all exchanges must register as virtual-asset service providers (VASPs) and the regulator will examine each to determine if they are in compliance with local law. In turn, this has generated considerable interest in the Korean digital asset market from both domestic and international institutions as a way to give the industry scale to comply.  

Oleg Smagin, Global Business Manager at Delio, a Korean cryptofinance platform, told Blockworks in an interview that the “rhetoric of the government has recently changed”. Because the corporate culture is so risk averse, he expects near universal compliance with these new rules but this might come at the cost of smaller exchanges. 

“After the Financial Services Commission recommended strengthening the monitoring of crypto related transactions a few banks withdrew their plans to partner with crypto exchanges making it even more difficult now for second-tier exchanges to comply with regulations related to real-name accounts coming in September,” he said. 

Smagin also said that the regulator’s assessment that digital assets have “no intrinsic value” and that “all local crypto exchanges may soon disappear” has also dampened enthusiasm in the market. 

So far only four of the 60 crypto exchanges in the country are using the real-name accounts and would be considered in compliance with the law. 

The largest exchange in Korea is Bithumb, which has just under $1 billion in daily volume according to CoinGecko

Morgan Chittum contributed to this report. 

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

Ethereum Dencun will enable Ethereum transactions to be submitted as blobs, potentially alleviating the costs of posting data on the blockchain

article-image

After a rocky start, bitcoin ETF shareholders are now well in the green

article-image

Revolut said that the standalone crypto exchange is currently “invite only”

article-image

The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile