South Korea is expected to allow more of its digital currency exchanges to continue to trade beyond the cut-off date for its new licensing scheme, despite the looming regulatory deadline.
Legislation introduced in the country imposed a deadline on September 24 for the registration of any digital currency exchange that wishes to continue to do business in the country. However, with fewer than half of the country’s digital currency exchanges having been approved, the move looks set to cause significant disruption to the sector.
Any exchange failing to report to the country’s Financial Intelligence Unit (FIU) ahead of the September deadline is eligible for closure. Alongside the registration requirement is a whole raft of new compliance measures, making conditions more difficult for those that do decide to register under the new framework.
The regulations are split into two main types of requirements, Information Security Management System (ISMS) certification and a bank contract covering real-name accounts, as per the new compliance requirements.
Of the 60 exchanges currently operating in South Korea, only Upbit has so far satisfied both grounds, with other major exchanges struggling to meet the requirements on one or both counts.
Smaller exchanges too have faced difficulties in meeting the registration and compliance requirements, with some calling on the FIU to extend the deadline. In response, the FIU has now agreed to allow exchanges with ISMS certification a channel to continue to trade, without having the real-name account measures in place for the deadline.
However, in order to qualify under the exemption, exchanges are required to remove transaction support for Korean won by September 17, effectively meaning they can no longer service most local cash-to-crypto transactions.
The new compliance requirements have been widely considered to be too rigorous, with a number of exchanges expected to leave the Korean market altogether.
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