Beginning next month, crypto exchanges with ‘real-name’ bank accounts in South Korea should maintain a reserve fund with a minimum of $2.3 million.
Via a strategy meant to enhance client protections, crypto exchanges in South Korea must put aside a minimum of 3 billion won (an estimated 2.3 million dollars) in bank accounts as a safeguard. These new requirements apply to exchanges that have been provided accounts from real-name local banks.
Further, they will be implemented from September in line with the updated guidelines for virtual asset operators published by the Korean Federation of Banks (KFB) in July this year.
In this context, real-name accounts are the KYC’d clients with a similar name at the bank as the exchange. The guidelines show that the 3 billion won minimum of the needed cash reserves conforms to 3 billion won and higher or 30 percent of the crypto exchange’s everyday average deposits. Further, the reserves will have a cap of 20 billion won.
Crypto Exchanges with High Trading Volumes Restate Compliance to New Measures
Despite these new measures meaning additional expenses, major crypto exchanges in South Korea with high trading volumes, for instance, Bithumb and Upbit, should not encounter considerable challenges as they implement new measures.
Upbit, the country’s biggest crypto exchange, divulged to local media via its representatives that it would faithfully enforce the new rules. Further, Bithumb claimed it was getting ready for the new regime without a snag.
Nevertheless, smaller trading networks, particularly those running on coin-only markets or those lacking crypto-to-fiat pairs, may experience challenges with the new requirements. The exchanges lack bank accounts and do not need to amass reserves.
However, some of them chose to hold talks with banks to open such accounts to ensure survival in the market. Besides, it is also mandatory to adhere to the Specific Financial Information Act introduced in 2021.
Crypto Exchanges Vow to Overcome Illicit Financing
This specific act governs the reporting and utilization of defined financial transaction data to avert terrorist financing and money laundering. This reduced trading volumes as traders shifted to more prominent exchanges with improved compliance guidelines.
An example of such an exchange is Hanbitco, which allegedly acquired a bank account recently. However, an unidentified representative in the virtual asset industry revealed to the local media that this might be the final Straub before the regulations’ implementation next month.
The Korean Federation of Banks included numerous other standards in its operating rules, for instance, enhanced customer authentication (KYC) that will come into effect in January next year.
The new guidelines will compel local companies that provide or possess cryptocurrencies to reveal a range of data, for instance, business models, the amount and features of their crypto tokens, and internal accounting rules regarding cryptocurrency sales and related profits.
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