Many South Korean crypto exchanges may have less than six months to live as new Anti-Money Laundering (AML) measures threaten to stifle the local industry.
As reported by the Korea JoonAng Daily, an amendment to the nation’s money reporting laws came into effect on March 25.
The amendment — part of the government’s crypto-crime crackdown — gave exchanges six months to disclose their businesses to the Korea Financial Intelligence Unit (essentially South Korea’s SEC).
- This transferred the onus of screening crypto exchanges from the platforms onto banks.
- Should banks find illegal activity on exchanges (like money laundering), the bank would be responsible.
- Authorities could force banks to pay compensation if activity goes undetected.
This is reportedly no problem for the country’s four largest crypto exchanges ― Bithumb, Coinone, Upbit, and Korbit.
However, more than 100 smaller platforms have reportedly found it tough. Most are unable to find banks willing to issue accounts to crypto traders.
South Korean banks poo-poo crypto cash
Apparently, South Korean banks are unwilling to bear the responsibility of handling funds associated with digital assets.
- Under the new AML law, South Korean exchanges need to partner with a bank.
- Banks must assess any potential risks, security standards, and business structure.
- There’s however no unified standard among banks to assess crypto exchanges.
A local exchange told Korea JoonAng Daily: “We have the necessary technologies to prevent money laundering, which is the main point of the new law, but financial authorities are not providing thorough evaluation guidelines.”
“We will try to the best of our ability to partner with banks and are willing to even start negotiations with provincial banks if necessary.”
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Prominent crypto exchange OKEx shuttered its South Korean operations in late March. OKEx directly attributed the move to the nation’s new AML laws.