One of South Korea’s most successful digital asset projects faces an uncertain future after local regulators rejected its registration application. PayProtocol, the project behind Paycoin tokens, was ordered to secure a banking partner or suspend its operations by February 5.
Paycoin launched in 2019 and initially targeted the South Korean payments market. It became a great success, with the token reportedly accepted by over 100,000 major merchants, including KFC, 7-Eleven, Burger King, and CGV, Korea’s largest movie theatre.
However, the Financial Services Commission (FSC) demanded in 2022 that PayProtocol change its registration status to reflect its payment services.
“We were operating as a crypto wallet operator, but we were asked to be registered as a virtual asset service provider,” revealed Lim Se-ri, a spokesperson for Danal, which owns PayProtocol.
Earlier this month, the FSC, through its anti-money laundering agency Financial Intelligence Unit (KoFIU), rejected the company’s application as a VASP. The regulator claimed the rejection was because the company lacked a local banking partner, a prerequisite for any VASP operating in South Korea.
PayProtocol has criticized the regulators, claiming that the watchdogs only demanded the banking partnership five months after the company had submitted its application in May 2022. They gave the company two months to secure a partner.
FIU ordered PayProtocol to wind down its services in the East Asian country by February 5 if it failed to land a banking partner by then. The company’s application to extend the deadline was rejected.
PayProtocol is choosing to fight and believes it can land a banking partner before the deadline, which is in three weeks.
“The best measure PayProtocol can take to stop the service suspension and protect users is to reapply for the license by acquiring the bank partnership by Feb. 5,” Ryu Ik-dun, the PayProtocol CEO, recently told local media outlets.
South Korea’s requirement for a banking partner for every VASP has proven too tough a test for small companies. As CoinGeek has reported in the past, Korean banks have been hesitant to work with these smaller VASPs as they believe the risk outweighs the benefits. This requirement was a simple ask for the bigger exchanges, with the big four—Upbit, Bithumb, Korbit, and Coinone—securing banking partnerships almost immediately after the rule came into effect.
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