South Korea suspends dozens of exchanges pending Financial Intelligence Unit registration

By midnight today, Friday, September 17, over 60 cryptocurrency exchanges in South Korea must inform their users of a full or partial suspension of trading, one week before a new law adopted by the government comes into effect. To keep working, crypto exchanges have to register with the Financial Intelligence Unit by September 24, Reuters reports. The internet security agency must issue a corresponding security certificate. The platforms have to offer exclusively bank-verified accounts, which means a series of partnerships with banks will be in order.

Exchanges that haven’t registered with the FIU will have to close down before or on September 24. Those that register, but haven’t reached partnerships with banks, cannot offer trading in won.

A representative of the country’s Financial Services Commission commented:

“Should some or all services need to be closed, (exchanges) should notify customers of the expected closing date and procedures to withdraw money by at least seven days before the closure. This should be completed no later than Sept. 17.”

So far, 40 exchanges need to register and conclude partnerships and another 28 have to secure bank partnerships. This second group has had security certificates issued.

Just 4 compliant exchanges in the country

Of all the crypto exchanges in the country, only four have both registered and secured partnerships. They are Upbit, Bithumb, Coinone, and Korbit. A few small exchanges have decided to end trading in the domestic currency. They will continue with just digital coin trading pending agreements with banks.

Crypto investors stand to lose $2.6B

About 70% of South Korea’s cryptocurrency exchanges expect to close, which means investors could lose as much as KRW 3 trillion, equivalent to $2.6 billion. Cho Yeon-Haeng, president of Korea Finance Consumer Federation, told the Financial Times:

“Huge investor losses are expected with trading suspended and assets frozen at many small exchanges as customer protection will not likely be the priority of those exchanges facing an imminent closure.” 

Last year, the government amended existing laws, making AML/CFT obligations mandatory for all South Korean exchanges. In addition, they introduced the requirement that firms obtain an operating license from the Financial Intelligence Unit.  

The future of exchanges in South Korea

Apart from proposing tax changes for cryptocurrencies, the government intends to keep working to bring the industry into compliance with anti-money laundering policies. It is too early to tell what effect future policies will have on cash withdrawal rules, rules on age limits, or withdrawals of funds from e-wallets.