The deadline for cryptocurrency exchanges targeting South Koreans to register before the country’s financial watchdog and getting a license under the new rules is looming. However, overseas crypto exchanges seem to be distancing themselves from the situation. According to The Korean Herald, by September 24, these firms must register with the South Korean anti-money laundering authority to comply with the stricter measures.
For example, US-based crypto company Bitfront – founded by the messaging app Line – has announced it will stop providing services to South Korean residents starting September 14, 2021, citing such upcoming regulations. Moreover, they also clarified that Korean-issued credit card transactions wouldn’t be processed through its gateways.
But the scenario for domestic crypto exchange is even more pessimistic, as reports from local media outlets, Hankook Ilbo and Hankyroreh, noted that several firms failed to pass their regulatory consulting audits ahead of the deadline. In fact, it’s not surprising news because local authorities found in July that some exchanges were allegedly using fraudulent banking operations.
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Lacking Proper Anti-Fraud Systems
According to the new rulings supervised by the Financial Services Commission (FSC), banks working with crypto exchanges should issue accounts with customers’ real names to prevent money laundering. Also, in the recent audit, supervisors highlighted that these scrutinized exchanges didn’t have proper standards for listing or delisting tokens whatsoever, lacking anti-fraud systems that could prevent price manipulation – an element of high interest for the South Korean authorities to tackle down.
Recently, as Finance Magnates reported, South Korean commercial banks are likely to see local cryptocurrency exchanges with ‘too many’ coins in offerings as high risk, which might deplete their chances to receive real-name account services. In April, the risk assessment guidelines drafted by the Korea Federation of Banks, a body of commercial and real-estate lenders, showcase the South Korean banks’ stance towards cryptocurrency exchanges. The banking body has 22 full members and 36 associate members.