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South Korea Implements New Reserve Requirements for Crypto Exchanges to Enhance Oversight
Reserve Requirement for South Korean Crypto Exchanges
Starting from September, cryptocurrency exchanges in South Korea will be mandated to maintain a minimum reserve of 3 billion won ($2.3 million) in their bank accounts. This move is in response to the country's Financial Services Commission (FSC) aiming to bolster supervision over the local cryptocurrency market and curb money laundering and illicit activities. The Korea Federation of Banks (KFB) is introducing these guidelines, which are applicable to exchanges with "real-name" bank accounts tied to user identities.
Guidelines for Virtual Asset Real-Name Account Operation
The newly published Virtual Asset Real-Name Account Operation Guidelines by the Korea Federation of Banks specify that exchanges must hold reserves equivalent to either 30% of their daily average deposits or 3 billion won, depending on which amount is larger. However, if 30% of the daily average deposit surpasses 20 billion won, only up to 20 billion won can be reserved. This requirement intends to ensure that exchanges have ample funds to cover potential losses or liabilities.
Several other standards, including Know Your Customer (KYC) procedures and additional authentication for fund transfers, have been outlined in the operating guidelines. However, while these standards are set to be implemented from January 2024, the 'reservation accumulation' requirement has been fast-tracked for early implementation.
Mixed Reactions and Implications
The introduction of these new regulations has sparked varying responses within South Korea's cryptocurrency industry. Larger exchanges like Upbit have embraced the move as a stride towards heightened transparency and stability in the sector. Nevertheless, smaller exchanges may face financial strain due to the reserve requirement.
It's essential to note that this reserve requirement exclusively pertains to South Korean cryptocurrency exchanges. However, considering the nation's substantial role in the global cryptocurrency market, these regulations could potentially carry broader implications for the industry. The Financial Services Commission will continue to vigilantly monitor the cryptocurrency landscape and implement further measures as deemed necessary.
