Coin-Only Exchanges In South Korea Face Extinction As Government Cracks Down On Crypto

Zinger Key Points
  • South Korean crypto exchanges brace for tighter regulations.
  • Exchanges scramble to meet new requirements, as government's crackdown on crypto raises concerns.

South Korean cryptocurrency exchanges are gearing up for tighter regulations as the country mandates a minimum reserve of 3 billion won ($2.3 million) for those with bank-issued real-name accounts.

This move is part of South Korea's efforts to bolster consumer protection in the rapidly evolving digital asset industry.

The requirement, set to be announced by financial authorities, aims to ensure exchanges can compensate users in case of unforeseen events like hacking or system failures, a local media outlet reported.

Exchanges supporting transactions between the Korean won and cryptocurrencies, which already possess real-name accounts, appear to be in compliance.

However, exchanges facilitating only coin-to-coin transactions, many of which are capital-impaired, face challenges in meeting this standard.

The "Virtual Asset Real-Name Account Operation Guidelines," released by the Korea Federation of Banks last month, stipulates that exchanges must set aside the larger of 3 billion won or 30% of their daily average deposits.

For major players like Upbit, the 30% threshold can significantly exceed the base amount. If this percentage surpasses 20 billion won, the reserve is capped at that figure.

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While the banking sector's guidelines emphasize stronger customer verification and additional authentication measures, the reserve accumulation rule has been prioritized for September implementation.

The Financial Services Commission's Financial Intelligence Unit (FIU) is reportedly aligning with these banking guidelines.

Coin-only exchanges, grappling with reduced transaction volumes since the 2021 amendment of the Specific Financial Information Act, find the reserve requirement burdensome.

This situation might jeopardize their ongoing real-name account negotiations with banks.

Read Next: 'Give Up Serving US Customers For Now': Crypto Exchange Founder Sparks Debate On Strategy

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Posted In: CryptocurrencyNewsMarketsCoin-to-coin exchangeCrypto industrycrypto regulationsCryptocurrency reserve requirementDigital Assetsdigital currencyFinancial Services Commission's Financial Intelligence UnitSouth KoreaUpbit
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