South Korea is tightening the regulatory reins on its native crypto exchanges. Effective September, exchanges within the country must maintain a minimum reserve of 3 billion won ($2.3 million). This move comes as South Korea seeks to fortify consumer protection in the crypto domain.
Elevated Financial Cushion For Consumer Protection
This policy may ensure exchanges can handle unforeseen financial duress or other liabilities. This approach by the South Korean authorities suggests an anticipation of the sector’s growth, coupled with the responsibility of safeguarding consumer interests.
In the crypto space, user trust and security are paramount. With the looming deadline, major exchanges such as Upbit and Bithumb are reportedly preparing to meet the stipulated requirements. This development comes after guidelines released in July by the Korea Federation of Banks, as highlighted by local media outlet News1.
Titled “Virtual Asset Real-Name Account Operation Guidelines,” these guidelines emphasize the need for exchanges to allocate either 3 billion won or 30% of their daily average deposits in reserves.
This strategic reserve ensures exchanges can sufficiently “fulfill their liability for damages to users” if unforeseen risks or liabilities materialize. However, the guidelines also dictate that these reserve funds shall not exceed a ceiling of 20 billion won.
South Korea Building Trust In Crypto Infrastructure?
By ensuring that exchanges maintain substantial financial reserves, the potential for a crisis adversely affecting users is significantly reduced.
Furthermore, South Korea’s legislative body recently approved new laws to enhance safeguards for cryptocurrency investors in June. This updated framework, which encompasses 19 distinct digital asset-related bills, grants both the Financial Services Commission and the Bank of Korea the jurisdiction to supervise cryptocurrency entities and guardians of digital assets.
This legislation empowers authorities to impose sanctions if they identify inequitable virtual asset transactions. Lee Suh Ryoung, chief secretary general of the Korea Blockchain Enterprise Promotion Association in Seoul, noted:
The law in general remains stuck in the perspective of traditional finance in terms of regulating crypto.
Meanwhile, a study released last week indicates that roughly 82.5% of South Korean GenZ individuals in their 20s are investing in altcoins, with Ethereum (ETH) being the exception. Notably, XRP emerges as a clear favorite. About 20.7% of these younger investors, or one in every five, regard XRP as their top altcoin investment choice.
Featured image from Unsplash, Chart from TradingView