South Korea Sets The Bar High for Crypto Exchanges
As the global crypto market gains traction, countries worldwide are refining their policies. South Korea is no exception.
A Move Toward Safer Cryptocurrency Transactions
Cryptocurrency exchanges in South Korea with bank-issued real-name accounts now face a new requirement. They need to reserve either 30% of their daily average deposits or a minimum of 3 billion won ($2.26 million) by September 2023, says a report by News 1.
This directive emerges from the “Virtual Asset Real-Name Account Operation Guidelines”, released by the Korea Federation of Banks earlier this July. The cap on this reserve requirement stands at 20 billion ($15 million).
The key objective? To guarantee that crypto exchanges can reimburse users should there be a system breakdown or a cyber-attack.
Impending Regulatory Changes
The enforcement of the reserve criteria will begin this September. Other regulatory enhancements, encompassing rigorous Know Your Customer (KYC) measures and protocols for collection transfers, are set for January 2024.
Potential Hurdles for Smaller Exchanges
Well-established entities like Upbit and Bithumb are actively making preparations to align with the operating guidelines. However, the smaller exchanges, especially those only managing coin-coin markets with no real-name accounts, face challenges. The reason? A sharp drop in their transaction volume.
Previously, some of these exchanges tried forging agreements with local banks to attain real-name account issuance, aligning with the revamped Specific Information Financial Act from 2021. Nevertheless, it seems unlikely for most to finalize these agreements before the guidelines get enforced.
Hanbitco, a local exchange that was recently accorded a real-name account, finds itself in troubled waters. An unidentified representative from the crypto sector hinted to the media that this might be Hanbitco’s “last stand”.
Conclusion: A Stride Towards Strengthened Crypto Infrastructure
South Korea’s move to enforce a reserve requirement showcases a deliberate step towards enhancing the safety and integrity of its burgeoning crypto sector. While larger exchanges gear up to adapt, smaller entities face a testing period, emphasizing the nation’s commitment to prioritize user security over rapid market expansion. This is a signal not only to South Korea but also to the global market, indicating that as the crypto space matures, robust infrastructural standards will play a pivotal role in shaping its future.