South Korean crypto exchanges have till midnight on Friday for registering themselves with financial authorities, if they wish to continue operating in the country legally. Only a total of 10 out of the more than 60 crypto exchanges in the nation have submitted their documents to the anti-money laundering (AML) body in South Korea. Both foreign and local crypto exchanges have to register with the Financial Intelligence Unit (FIU) in the country in order to provide their services to Korean investors. This is in accordance with the stricter regulations that will come into effect after September 24th.
As mentioned earlier, only 10 digital asset trading platforms have filed applications so far with the FIU, which is the anti-money laundering department of the Financial Services Commission (FSC). According to the body, this group comprises of Korbit, Coinone, Flybit, Bithumb and Upbit, amongst others. The revised Special Funds Act in South Korea, which has introduced these stricter regulations, was implemented on March 25th and will now be enforced, after a six-month grace period comes to an end. As per the provisions outlined, these crypto exchanges are also required to have Information Security Management System (ISMS) certificate issued by the Korea Internet and Security Agency.
As per financial officials, around 28 of the total 66 exchanges in the country have obtained this certification so far. Other than this requirement, the crypto exchanges also have to partner with domestic banks for issuing real-name bank accounts for their customers. Failure to do so means that the exchange will not be permitted to offer trading pairs with the fiat currency in the country. Real-name bank account deals have so far been secured by only four of the leading crypto exchanges, which are Korbit, Bithumb, Coinone and Upbit. This is because these financial institutions are fearful of their exposure to risks associated with cryptocurrencies, such as money laundering.
It should be noted that mid-size exchanges, including Foblgate, Coredax and Flybit, have decided to suspend Korean won pairs. While it is hard to estimate the exact turnover on these exchanges and smaller platforms, market observers stated that they account for around 5% to 7% of the total crypto that’s traded in the Korean market. As a matter of fact, some exchanges have also delisted a few ‘high-risk’ coins in light of these upcoming regulations. Earlier this week, it was reported that 60 exchanges are expected to discontinue some or all of their services aimed at Korean investors.
At that point, only Upbit, which is the largest crypto trading platform in South Korea, had the license for conducting business in the country. This was after its operator, Dunamu Inc. had filed a report with the Financial Intelligence Unit, which had been reviewed and accepted. Crypto exchanges that don’t provide the necessary documents, like a written intent of doing business at the end of the day, would have to shut down. Operators that continue their activities without complying with the new rules would have to face five years in prison, along with hefty fines.