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With the implementation of new rules from the Financial Services Commission of South Korea (FSC), many small cryptocurrency exchanges in the country fear they will be forced to close.
These rules require each exchange to prove that it has a real-name account held at a Korean bank by September 24, 2021, with the problem being that domestic banks refrain from any risk assessment for foreign exchanges. applicants, with the exception of the four main scholarships in the country. trading platforms.
Smaller exchanges are now considering suing the government for its alleged failure to take responsibility for much of its regulatory mandate, according to a report from Business Korea. Under the new FSC rules, domestic banks are required to deny their services to any crypto exchange clients that they believe have not complied with identity verification measures or reported suspicious activity.
In the words of an industry official, the government and financial authorities have essentially shifted much of the responsibility for verifying crypto exchanges to banks, which are thus forced to take responsibility for issuing coins. real name accounts.
Since the Korean Federation of Banks and several commercial lenders have already appealed to the FSC to change the new rules, fearing their own potential liabilities for financial crimes on crypto exchanges, the government may therefore soon face pressure from all sides.
Business Korea says an undisclosed number of exchanges are considering filing a constitutional complaint against the government and financial regulators for their perceived waiver of responsibility for regulating the industry and ensuring best practices.
K Bank, NH Bank, and Shinhan Bank are all reportedly engaged in verifying the big names in the Korean crypto industry: UPbit, Bithumb, Coinone, and Korbit. Yet a similar pledge is denied to lesser-known platforms, for which banks are loath to take responsibility. An anonymous representative of the cryptocurrency exchange told reporters:
Banks these days refuse to initiate their verification processes for cryptocurrency exchanges without clear reasons and most exchanges do not have a chance to prove themselves. […] The Financial Services Commission must intervene immediately.
Related: Korean Banks To Rank Crypto Exchange Clients As High Risk
Twenty crypto exchanges in Korea had already gathered for a closed-door meeting with the FSC’s Financial Intelligence Unit earlier this month, where they reportedly expressed concerns about obstacles to meeting account requirements in real name, among other operational difficulties. Then, as now, only the stock markets of the big four seemed to have any chance of securing a future under the new directives.
In addition to the lack of commitment, the costs associated with the creation of such banking partnerships are prohibitive for most small operators. It is estimated that the changes brought by the new rules, as part of a larger set of new crypto-specific regulations, are expected to affect around 60 exchanges in the country.
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