South Korea to shut down 11 local digital currency exchanges: report

Getting your Trinity Audio player ready...

The South Korean financial services regulator is planning to shut down 11 digital currency exchanges, according to a local report. The 11 have reportedly engaged in illegal activities and used fraudulent collective bank accounts.

A report by the Korea Herald claimed that the Financial Services Commission plans on denying the 11 local exchanges approval to serve the South Korean market. Citing unnamed sources within the regulator, the outlet claimed that the names of the 11 exchanges have yet to be disclosed. It’s also unclear if the exchanges engaged in any other illegal activities aside from the use of “fraudulent collective bank accounts.”

The FSC also plans on implementing stricter regulations for the digital currency industry, the sources told the outlet. In the past year, the watchdog has been stepping up its oversight of the industry, which has already led to several exchanges looking at possibly shutting down their operations in the East Asian country.

The biggest effect has been felt by the small and mid-sized digital currency exchanges. On July 15, Darlbit became the latest exchange to concede to the increasing regulatory scrutiny, announcing that it was shutting down. Two weeks later, CPDAX followed suit, announcing that it would shut down on September 1, three weeks before the September 24 deadline by the FSC for exchanges to acquire operating licenses.

“It is not a temporary but a permanent measure to close business. Those who possess cryptocurrencies in the account must withdraw them before 3:00 p.m. on Aug. 31,” CPDAX told its users.

For most exchanges, the most difficult requirement by the FSC has been establishing a relationship with a banking partner. So far, only four exchanges, among them Upbit and Bithumb, have been able to partner with banks.

However, it’s not just the banking relationship that’s leading exchanges to shut down. For others, it’s the requirement to acquire an Information Security Management System (ISMS) certificate. Many exchanges in Korea have yet to fulfill all the requirements for the certificate. Bitsonic, a local exchange, recently announced it was temporarily shutting down services to renew its security systems in order to ensure it complies with ISMS requirements.

South Korean exchanges have until September 24 to meet all the FSC requirements and obtain a license from the watchdog. This is after a six-month grace period given by the FSC to allow the exchanges to meet its requirements. There have been efforts to extend the grace period—including a push by Congresswoman Cho Myeong Lee, who attempted to have the deadline pushed to December 24—but they have all been unsuccessful.

Watch: CoinGeek Zurich panel, The Future of Trading & Digital Assets