South Korea’s Financial Service Commission Dialogues with The Country’s Crypto Exchanges

In a recent dialogue with South Korean financial regulators, South Korean exchanges discussed their challenges with the government.

Per the D.Street, a local South Korean news outlet, at least 20 crypto exchanges gathered for a private discussion with the South Korea financial services commission (FSC), with a sub-section of the FSC, the financial intelligence unit (FIU) also attending the meeting.

South Korea Virtual Asset Service Providers (VASPs) Given Six Months Grace

The government representatives revealed that the authorities set to implement the outcome of the virtual asset provider study. It would be recalled that the FSC had issued a press release on May 28 that it would implement additional policies to improve its monitoring of the digital currency space to fight against illicit financial transactions. 

However, all crypto exchanges and virtual asset service providers (VASPs) have six months to register with the FSC – these six months’ grace will expire by September 2021. Some of what would indicate the completion of their registration process would be opening trading accounts with real names and earning an Information Security Management System certification. 

This certification would be proof that these exchanges can withstand any security breach, especially hacking attacks. In a bid to test-run its CBDC, South Korea has banned privacy coins, and it’s enforcing taxation on crypto investments. Now, it plans to increase oversight on crypto exchanges that are yet to fulfill all compliance regulations.

While records show that 60 VASPs operate in South Korea, only 20 of them attended Thursday’s meeting with the government. It is also on record that four of these VASPs (Bithumb, Upbit, Korbit, and Coinone) who were also part of the 20 VASPs at the meeting have opened real name trading accounts.

However, the remaining 16 VASPs cited operational difficulties as the main reason for not yet fulfilling the real-name trading account requirement. While the FSC empathized with these exchanges, it couldn’t proffer any solution to the problem as it asked to keep liaising with South Korean banks until they fulfill the requirement.

Small Exchanges Unable to Fully Comply With FSC Requirement 

South Korean exchanges can’t open real-name trading accounts unless they involve the banks. However, costs are a major stumbling block to fulfill this requirement as many of these exchanges do not have enough transactional volume to fulfill the banks’ requirements. Per the Cointelegraph, Upbit paid Korea bank ten times its Q4 2020 payment in Q1 2021.

In another development, the South Korean government has revealed that various financial bodies have different roles and responsibilities to play in maintaining crypto laws in the country. In recent months, South Korea has introduced new policies regarding anti-money laundering and capital gains tax.

Some exchanges might become extinct with this new update and could, in turn, affect the country’s dominant workforce. It is on record many of the country’s youths are quitting their jobs and take up crypto trading as a job.

Nevertheless, some South Korean crypto analysts opine that the country’s crypto market is saturated with trading platforms, and stricter oversight policies are required to prevent investors from losing their investments.

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