Countries all over the world are doing their best to protect citizens from the downsides of cryptocurrencies and South Korea is leading the charge by taking regulations of the industry to another level. South Korean cryptocurrency exchanges such as Upbit have, this week, moved to delist or warn against specific digital assets they have judged to be “high-risk” for investors.
This new directive has been brought about by the increased level of regulatory requirements by financial regulators into cryptocurrency service providers’ operations. Last week, Korea’s Financial Intelligence Unit (FIU), which is tasked with oversight of the cryptocurrency market, reportedly reached out to no fewer than 33 crypto trading platforms that operate in the country insisting that the regulator will be conducting field consultations before September 24th, 2021.
READ: Why the CBN wielded the big stick on cryptocurrency transactions
The regulator claimed that the consultations aim to check whether or not the businesses are compliant with requirements set by the Specific Financial Transactions Act, which came into force in March 2021.
One of the cryptocurrency exchanges under the jurisdiction of the country, Ubit, delisted Maro, Paycoin, Observer, Solve.Care and Quiztok last week and issued warnings on its site for six cryptocurrency assets on June 11. This warning triggered a one-week review process which decides whether or not to delist the coins in question.
The Korean Herald, a newspaper in South Korea, noted that the initial delisting of the coins sparked a massive sell-off in the coins’ prices, typical around 50–70% in value. Beyond the investment warnings published in English, Upbit’s new investment warnings reportedly extend to 25 different assets, which accounts for 14% of the coins listed on the platform.
READ: China blocks cryptocurrency-related accounts on Weibo
Asides from Upbit exchange, a reported total of 11 out of 20 exchanges, who have received a Security Management System certificate, have taken similar moves. The Korean Financial Supervisory Service has also contacted multiple exchanges requesting that they provide the agency with the details of delisted or suspended assets this week.
Additionally, the Korean Financial Services Commission (FSC) has reportedly formed five new working groups, each tasked with a specific obligation, to ultimately implement Korea’s new cryptocurrency regulatory regime, ranging from advising exchanges seeking registration and working with the National Assembly to enact measures aimed at improving the country’s cryptocurrency ecosystem.
READ: Ripple seeks documents from offshore exchanges to aid case against SEC
The groups’ assigned roles are indicated in their names which are; Daily Situation Group, Reporting and Response Group, On-the-spot Consulting Group, Capital Market Group and System Improvement Group. Under the support of the FIU, the groups will work together with the Financial Supervisory Service’s Anti-Money Laundering office, Korea Exchange Securities Market Headquarters, Korea Securities Depository, Korea Federation of Banks and Koscom.
What this means
Regulations coming to the cryptocurrency space is inevitable as the increasing use of cryptocurrencies to perpetrate crime, especially ransomware, grows. This way, the country’s regulatory bodies are trying to position themselves so that they are in a better position to protect investors in case of fraudulent activities. This also means that the country will have no other choice but to accept that the cryptocurrency market is here to stay and they need to do what they possibly can to make the space safer for investors.
The new policy from the FSC in South Korea will require that banks classify any crypto exchange clients as “high risk”. The agency has also clarified its roadmap for ensuring that cryptocurrency exchanges seeking authorization must implement strong transaction monitoring and uphold strong user ID and KYC requirements.
