The Financial Services Commission (FSC) of South Korea shut down 37 crypto exchanges for failing to meet the deadline and comply with the new regulations. Specifically, 37 crypto-exchanges were given until the 24th of September to implement the new guidelines previously imposed by the Act on Reporting and Using Specified Financial Transaction Information.
Moreover, this act obliges crypto exchanges to obtain the mandatory Information Security Management System (ISMS) license. Which consequently, is issued by South Korea’s Financial Intelligence Unit (FIU). In addition, crypto operators must also cooperate with local banks, for the purpose of providing legitimate name accounts.
Additionally, the banks will also enable traders to purchase or sell crypto via the Korean won.
Out of 66 crypto exchanges, only 29 were able to obtain the ISMS license. And out of the 29 remaining exchanges, only 4 were able to partner up with a local bank. These 4 are Bithumb, Upbit, Korbit and Coinone. The remainder of the 25 crypto exchanges has permission to proceed to operate as crypto exchanges only.
Under the instructions of the Financial Action Task Force (FATF), these 29 crypto-exchanges must implement the ‘travel rule. This is a global, mandatory anti-money laundering procedure, and of the main areas of concern for the FATF.
As a result, Upbit already developed its own system in order to comply with the ‘travel rule’. Coinone, Korbit and Bithumb on the other hand, are working together for the purpose of creating such a system.
The shut down of 37 crypto exchanges in South Korea is definitely a message for everyone in the crypto community. Especially for exchanges in South Korea. Anyone who fails to comply with the order to cease operations is facing a range of fines. And depending on the situation, the punishment can range between 5 years in prison, or $42.365 (55 million won).
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