South Korea’s Financial Services Commission (FSC) tightens its grip on cryptocurrency exchanges as it sets a deadline for the registration by September 24. Two-thirds of the Korean crypto sphere is expected to shut down amidst the introduction of the toughened financial regulations under the Special Financial Transaction Information Act.
With the Transaction Information Act taking effect on the same day of FSC’s deadline, registered cryptocurrency exchanges are expected to report every Korean accounts’ activities to the regulatory body.
This act would also allow banks to dismiss transactions of uncertified exchanges by reporting the said activities to the financial authorities.
All exchanges that fail to meet the requirements are expected to inform the users of their foreclosure by Friday, September 17, a week before the deadline, according to the report by Korean Herald.
Among the 63 exchanges operating in Korea, only around 29 were able to comply with the requirements of partnering with local banks for user accounts. Many Korean banks remained hesitant to participate in the crypto industry due to fear of getting mixed up with illegal activities such as money laundering.
Major overseas exchanges like Binance have announced the decision of suspending their crypto operations one month ahead of the deadline. The Binance team noted in their press release that it would ‘proactively comply’ with the FSC regulations by withdrawing its Korean won trading pairs.
The FSC said that exchanges who wish to shut down operations in South Korea should do so in a manner that won’t affect users. This compliance can help crypto investors to understand the changes and allow them to withdraw funds from their accounts.
According to the report by FX Street, around $2.6 billion in crypto assets can be lost once the government act has taken effect. This can potentially endanger Kimchi coins that are listed on local exchanges.
However, these regulations, especially Binance’s withdrawal, are aimed only to reshuffle the domestic crypto market and enhance the foothold of Korean stablecoins.
Bank of Korea (BoK), as reported by Korean Times, said that stablecoins would widen its presence amidst the crackdown since the valuation of these assets doesn’t fluctuate as much as other digital currencies.
‘Cryptocurrencies also have structural limitations for growth as governments around the world are moving to strengthen regulations on them amid fears that the crypto assets can be linked to illegal acts ― such as tax evasion, money laundering or terrorist financing,’ said the central bank in response to the regulations.
The institution added, ‘Stablecoins can be widely used for various purposes ― such as establishing a crypto ecosystem and cross-border remittance.’
The top 4 Korean exchanges including Bithumb and Coinone have already partnered with local banks in preparation for the looming deadline set by the FSC. On the other hand, Upbit is still being reviewed by the commission with the cooperation of the police and Korea Internet and Security Agency.
Minor coins are also expected to be delisted in the market amidst the crackdown since it’ll make it harder for risky coins to seek approval from the authorities.
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