With the implementation of new rules by the South Korean Financial Services Commission (FSC), many smaller crypto exchanges in the country fear that they will be forced to close.
According to these rules, every exchange must prove that it has a real name account with a Korean bank before September 24, 2021.; The problem is that the national banks, with the exception of the four most important trading platforms in the country, do not take part in any risk assessment for the inquiring stock exchanges.
According to reports, smaller exchanges are now considering suing the government for their alleged lack of responsibility for much of their regulatory mandate., according to a report from Business Korea. As part of the new FSC rules, domestic banks will have to refuse their services to any cryptocurrency exchange customer they believe has failed to comply with identity verification measures or reports suspicious activity.
In the words of an industry representative: the government and financial authorities have essentially shifted much of the verification responsibility from the crypto exchanges to the bankswho therefore are “forced to take responsibility for issuing real-name accounts”.
Since the Korean Banking Association and several commercial lenders have already appealed to the FSC to change the new rules – for fear of its own potential liability for financial crime on cryptocurrency exchanges – the government could soon be put under pressure from all parties.
Business Korea claims that an undisclosed number of exchanges are considering filing a constitutional appeal against the government and financial regulators for their alleged waiver of responsibility in regulating the industry and ensuring best practices.
K Bank, NH Bank and Shinhan Bank are committed to researching the big names in the Korean cryptocurrency industry: UPbit, Bithumb, Coinone and Korbit.However, a similar commitment is hidden from lesser-known platforms for which banks are reluctant to take responsibility. An anonymous representative from a crypto exchange told reporters:
Today, banks refuse to start their cryptocurrency verification processes for no apparent reason, and most exchanges have no chance to prove themselves. […] The Financial Services Commission must intervene immediately. “
Twenty cryptocurrency exchanges in Korea had already gathered for a closed meeting with the FSC’s Financial Intelligence Unit earlier this month.where they reportedly raised concerns about the barriers to meeting real name account requirements, along with other operational difficulties. Then as now, only the “Big Four” exchanges seemed to have a chance of securing the future under the new guidelines.
In addition to the lack of commitment, the fees for setting up such banking associations are prohibitive for most of the smaller operators. The changes caused by the new rules as part of a larger set of specific new crypto regulations are estimated to affect around 60 exchanges in the country.