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South Korean bitcoin regulation is being tightened further, with new requirements for banks and bitcoin exchange companies.
New guidelines released by South Korea’s Financial Services Commission, or FSC, are likely to affect about 60 unlicensed cryptocurrency exchanges in the nation, and a new policy for banks will oblige them to label any cryptocurrency exchange clients as “high risk.”
According to the Korea Times, the new guidelines were announced on Sunday and are intended to ensure that crypto exchanges strengthen their monitoring of transactions and uphold strong user ID requirements. Until recently, only the four main South Korean exchanges have established real-name accounts that have been cleared by banks. The FSC justifies its actions by stating that there is a considerable desire from clients for more safety for funds housed at smaller cryptocurrency exchanges.
The ability of exchanges to operate beneath the radar will come to an end in September, with the FSC’s deadline for exchanges to file petitions for an operational licence by September 24th. Following submission, financial intelligence officers will conduct a three-month assessment of applicant crypto exchanges’ trading operations. According to reports, a special focus would be on prohibiting the use of borrowed or false accounts to conduct transactions on exchange platforms.
For their part, banks will have to refuse their services to any exchange client that fails to comply with ID verification measures and to report suspicious activities, e.g. large transfers made to crypto exchange operators from unidentified accounts, to the Korea Financial Intelligence Unit.
The Korea Federation of Banks and numerous commercial lenders have petitioned the FSC to decrease their responsibilities for financial crimes committed on cryptocurrency exchanges, which may rise if the exchange industry is subjected to more regulatory scrutiny. Some institutions are afraid that their screening and acceptance of certain crypto exchanges would be referenced by investors as evidence of the platforms’ credibility. According to a source in the industry:
“Banks are essentially forced to take responsibility for issuing real-name accounts. It therefore is reasonable that there should be some immunity for undertaking the dangerous and costly task.”
Not only have banks been vociferous about the upcoming changes to the sector’s regulation. Small and medium-sized exchanges in South Korea have recently addressed their concerns to financial authorities, highlighting the high bank service costs that make partnerships too expensive for smaller enterprises.