11 Crypto Exchange are shutting their door in South Korea
South Korea’s leading financial regulator, Financial Services Commission (FSC) has taken action to shut down 11 local cryptocurrency exchanges for their involvement in illegal activities, The Korea Herald reported on 1st August, 2021.
The names of the 11 suspected exchanges who used fraudulent accounts, have not yet been revealed by the authorities. They will not be able to gain approval from the FSC for further operations. Though Darlbit and Bitsonic (South Korean digital asset trading platforms) made announcements about ceasing their business operations following FSC’s probe.
Another two largest crypto exchanges of South Korea, Upbit and Bithumb remains unaffected by this latest crackdown due to their offering real-name account registration to their customers which has been mandatory for anti-fraud and money laundering reasons.
Why FSC are shutting 11 Crypto Exchange?
Since 2018 real name account registration has been compulsory in South Korea to root out money laundering and other deceitful activities. Banks are unwilling to extend partnership with local cryptocurrency exchanges due to the low risk reward factors. That is why several smaller trading platforms have found themselves backed in the corner.
Nevertheless, FCS’s probe is not only applicable to the leading exchanges of South Korea. Bithumb among the very few crypto trading platforms have their partnerships extended until September. In July, they also imposed a prohibition on their employees investing or trading in crypto.
Amid this temporary termination of operation BitSonic renews their information security management system (ISMS), a set of measures reportedly required for trading platforms to run crypto business legally in the country.
However, the regulatory crackdown are not only applicable to the local cryptocurrency exchanges but also to foreign crypto exchanges businesses. By September 24 of this year the foreign crypto exchanges have to register with the Korea Financial Intelligence Unit (KFIU). Else, they will have to close business or possibly face legal action.
CBW - External Analyst