The Financial Services Commission (FSC) which is the top financial regulator of South Korea has officially stated that only 29 crypto exchanges out of the 66 that were operating in the country have registered themselves with the Information Security Management System (ISMS) and has also submitted a report to the Financial Intelligence Unit (FIU) within the September 24 deadline, thus complying with the new regulations needed to run a crypto exchange within the country. This also implies that the 37 remaining crypto exchanges that were operating within the country up till now before the new regulations came into effect will seize to operate, in other words, they will be shut down for not meeting the new operating standards of the country.
Regulations for the exchanges dealing in the South Korean Won
The new crypto regulations also state that the exchanges that are willing to offer their services in the South Korean Won must partner themselves with a local bank of South Korea and provide real-name accounts to all its users.
Till now, only 4 crypto exchanges out of the permitted 29 have partnered up with local banks to provide their services in the Korean Won. The 4 crypto exchanges are Coinone, Korbit, Bithumb and Upbit (largest exchange of South Korea). The remaining 25 exchanges can only operate as crypto-only exchanges. Along with this, all crypto exchanges in South Korea must also follow another regulation called the “Travel rule” regulation.
What is the Travel Rule regulation?
The “Travel Rule” regulation is simply another name for an anti-money laundering system that follows global anti-money laundering standards. The “Travel Rule” regulation was set up on the recommendation of the Financial Action Task Force (FATF) which is an intergovernmental anti-money laundering watchdog of South Korea. As you can guess, the main objective of the “Travel Rule” regulation is to prevent any money laundering scam from happening via these exchanges and all exchanges operating in South Korea must abide by it.
It is reported that currently Bithumb, Korbit and Coinone are jointly working on a system to comply with the “Travel Rule” regulation whereas, Upbit is working on its own system to comply with this regulation.
Currently, all crypto exchanges permitted to operate within the country must follow the new regulation. Exchanges failing to do so will lead them to face a fine of 50 million won ($42,365) or a prison time of up to 5 years.
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