In preparation for the go-live of the new crypto exchange law scheduled to take effect in September 2021,exchanges are actively delisting obscure altcoins from their platforms, as the crypto-supporting lenders including NH Nonghyup Bank, and Shinhan Bank, among others, is now reviewing the operations of these exchanges to ensure they are fully in compliance with the Act on Reporting and Use of Certain Financial Transaction Information, according to reports on June 21, 2021.
Tough Times for Korean Exchanges
These are indeed tough times for crypto exchange startups in South Korea, as the few financial institutions supporting crypto-related businesses in the region have started reviewing top exchanges including Bithumb, Coinone, Korbit, and Upbit for anti-money laundering compliance and more.
For context, the country’s new crypto law which is known as the Act on Reporting and Use of Certain Financial Transaction Information is scheduled to go live on September 25 and it requires crypto exchanges to sign contracts with banks in order to be able to support fiat-to-crypto trading on their platforms and offer users real-name accounts for won deposits and withdrawals.
Per sources close to the matter, only the top four South Korean exchanges, including Bithumb, Upbit, Coinone, and Korbit were able to obtain banking licenses previously and the lenders are currently reviewing their processes, to ascertain whether they have run afoul of the financial laws before approving their license renewal applications.
Small Exchanges May Close Shop
In addition to servicing only real-name account holders that have a corresponding bank account, crypto exchanges are required to be Information Security Management System (ISMS) certified, and the banks will also review the police records of their officials, as well as their AML systems and internal controls.
Unfortunately, observers have predicted that small crypto exchange operators may be unable to meet these stringent requirements and as such, they could stop offering fiat-to-crypto trading to their clients or close shop entirely.
Currently, only a handful of lenders in South Korea support crypto exchanges, and these trading venues are now delisting obscure altcoins from their platforms in order to remain in compliance with the new crypto rules.
In related news, Korean authorities have made it that cryptocurrency traders will start paying a 20 percent tax on their gains exceeding $2,200 by January 2022.