The Korea Federation of Banks will soon mandate that South Korean cryptocurrency exchanges with real-name accounts hold a minimum reserve fund. According to local reports, the new rules outline at least 3 billion won fund (approximately $2.26 million).
Based on reports, exchanges that support transactions between the Korean won and cryptocurrencies will have to comply with the new reserve requirement starting in September.
New Crypto Exchange Reserve Guidelines for Operators in South Korea
The new reserve requirement will reportedly protect users in case of unforeseen issues such as hacking or system failures.
News1 reports that starting next month, cryptocurrency exchanges must hold reserves ranging from 3 billion to 20 billion won (around $2.2-$15 million).
As part of these guidelines, exchanges must maintain either 30% of their daily average deposits or at least $2 million in reserve, whichever is greater. For instance, larger businesses like Upbit must maintain 30% of their daily deposit requirement.
In addition to the reserve requirement, the guidelines will enforce stronger Know Your Customer (KYC) norms and rules for fund transfers. The report states that officials will implement all policies, except for the reserve requirement, by January 2024.
Additionally, the Financial Services Commission’s Financial Intelligence Unit (FIU) has reportedly prepared a draft for the rules. These regulations come in response to requests from cryptocurrency exchanges for clearer crypto framework.
Read more: 13 Best No KYC Crypto Exchanges in 2023
Can Exchanges Meet the September Deadline?
The report also finds that top exchanges like Upbit and Bithumb are ready to comply with the new guidelines.
However, coin-only exchanges are finding it hard to meet the requirements. This is largely due to a lack of capital, the paper explains. Coin-only exchanges have reportedly experienced a significant decline in trading volume following the introduction of the revised Specific Financial Information Act in 2021.
Meanwhile, South Korea has been taking steps to regulate the virtual asset market, especially regarding crypto exchanges. In July, the country launched a special investigation unit focused on cryptocurrency crimes. The unit aims to protect investors and tackle illegal activities in the sector.
South Korea’s Virtual Asset User Protection Act was kickstarted in June. It was the country’s first standalone legislation for digital assets and established key safeguards for crypto traders and users.
As Asian nations find a balance between innovation and investor safety, South Korea’s move is another stepping stone. This is particularly noteworthy as Western countries grapple with establishing a bipartisan framework for regulating digital assets.
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