South Korea has issued a stern warning to overseas digital currency exchanges operating in the country to register within the next two months or risk being shut down. The country’s financial markets regulator further warned exchanges face a five-year jail term and a hefty fine if they fail to register.
The country has been tightening its regulations around the digital currency industry for some time now, with the Financial Services Commission leading the charge. In its latest push, the watchdog wants to bring all overseas exchanges under its purview, in line with the Specific Financial Information Act.
In a press release, the FSC gave the exchanges a September 24 deadline to register with the country’s authorities or face an immediate shutdown. Under the Specific Financial Information Act, any exchange operator that continues to operate past the deadline without registering is liable for a five-year jail term. In addition, the operator will face a KRW50 million fine (US$43,500). The regulator also plans to block access to websites owned by exchanges that are yet to register after the deadline.
Korean traders must also be keen to ensure that the exchange they operate has abided by the registration requirements. Trading on an exchange that has yet to register beginning September 25 will be deemed illegal.
The registration requirements apply to any exchange that is offering its services to South Korean traders, whether it has an office in the Asian country or not. It shall also apply to any exchange that offers trading in Korean won, which supports the Korean language or whose marketing is geared towards Koreans.
The FSC noted that it had sent notices to 27 exchanges so far to notify them that they need to register with the Financial Intelligence Unit (FIU). It further pointed out that so far, no overseas exchange has attained the information security management system (ISMS) certificate, which is mandatory for such businesses in the Asian country.
The registration warning comes at a time when the country has been pushing for greater oversight of the digital currency industry. Aside from registration, it has insisted on enhanced systems to prevent money laundering through digital currencies. One of the biggest changes has been the need for every exchange to have a relationship with a bank for the issuance of real-name accounts to traders.
This requirement has proven to be the toughest one yet, with many banks shying away from dealing with exchanges. As CoinGeek reported, one banker stated that the risk involved with the industry outweighs the profits they stand to make. Currently, only Bithumb, Upbit, Coinone and Korbit have established banking relationships.
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