Good day everyone,
I hope you are all well and having excellent day, welcome to CryptoGod-1’s blog on all things crypto. New regulations for crypto exchanges in South Korea means they will be required to maintain a minimum of 3 billion won ($2.3 million) in a reserve fund.
Regulations
The regulations stipulate that this coming September cryptocurrency exchanges will be required to maintain 3 billion won ($2.3 million) in a bank account as a reserve fund. These are being brought in for protection against cases such as hacks or system failures, or whatever unforeseen circumstances may occur.
There are local exchanges like Upbit and Bithumb which according to reports are well-prepared and will adhere to the new guidelines outlined by the Korea Federation of Banks. The guidelines are known as "Virtual Asset Real-Name Account Operation Guidelines" and outline that at least 3 billion won or 30% of their daily average deposits (whichever is more) will need to be reserved to cover potential liabilities arising from risk events. The upper limit is capped at 20 billion won ($15 million).
These new regulations came about as part of a comprehensive crypto-focused legislation comprising 19 bills passed by the South Korean legislators. This grants oversight authority to the Financial Services Commission and the Bank of Korea, and they will have the power to regulate crypto operators and custodians. Authorities will also have the power to take action against unfair trading practices in the virtual asset sector.
Along with the reserve requirements, the regulations will also aim to improve and expand the Know Your Customer (KYC) procedures, while it will also refine rules for fund transfers. These remaining stipulations will come into force by January 2024.
While some of the larger exchanges like Upbit will have no issues meeting the reserve equivalent to 30% of their daily deposits, some of the smaller coin-only exchanges are facing difficulties with meeting these stipulations. This is due to capital constraints along with the decline in trading volumes following prior regulatory changes.
There has also been a dedicated investigation unit created to combat cryptocurrency-related crimes and protect investors in South Korea. This is all driven by the Virtual Asset User Protection Act passed in June this year, which is legislation specifically designed to safeguard traders and users who partake in the digital assets ecosystem.
Have a great day.
Peace. CryptoGod-1.
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