New crypto exchange regulations in South Korea will likely force 24 out of 63 crypto exchanges in the country out of operation.
The regulations are due to be enforced in less than a month, and the authorities remain adamant about extending the deadline despite appeals from the crypto industry.
According to a press release issued by South Korea’s Financial Services Commission (FSC), one-third of the crypto exchanges in the region will most likely be shut down by the deadline. The said exchanges are yet to meet the compliance requirements that were part of an actenforced earlier this year.
The FSC set September 4thas the deadline for exchanges to prepare and submit a report to the Financial Intelligence Unit (FIU) if they are to continue operating in South Korea. However, many exchanges listed in the FSC’s press release failed to meet the first requirement mandated by the new crypto regulations.
Exchanges are required to obtain the Information System Management System (ISMS) certification with approval from the Korea Internet & Security Agency (KISA). This would confirm that that the applicant has successfully constructed a system that guarantees the security of users’ information.
The ISMS application process takes three to six months, and the 24 exchanges singled out have not yet made the application to KISA to be certified, with less than a month left before the registration deadline. At this point, it is highly unlikely that they will be able to comply before the said date.
Meanwhile, the ISMS is currently reviewing applications sent in by 18 other exchanges while 21 exchanges out of the 63 have already obtained the certification.
As stated by the press release, those exchanges that have made the application could still be declined by KISA, in which case they will also be forced to close down after the Sept. 4 deadline. Furthermore, the FSC document also specified that securing the ISMS certification does not grant the exchanges a free pass to operate under the new rules.
After obtaining the KISA certificate, exchanges are expected to win a bank contract as a second requirement. The contract is supposed to provide exchange users with real-name withdrawal and deposit bank accounts in a bid to eradicate loopholes for financial crimes.
With the two requirements met, crypto exchanges can then submit a business registration report to the FIU to be reviewed.
The FSC went as far as issuing a warning at the end of the press release advising users to take preemptive measures and withdraw their cash and crypto deposits in case of any sudden shut down of an exchange.
South Korea has been actively ramping up its crypto monitoring and regulatory measures. At the beginning of the month, there were reports that regulators were going to shut 11 crypto exchanges for illegal activities and fraudulent collective accounts.