The four biggest South Korean crypto exchanges have joined forces to prepare for strict anti-money laundering regulations, reports The Korea Herald.
Bithumb, Coinone, Korbit, and Upbit created a new entity this week in response to the so-called “travel rule” — new global standards set for worldwide rollout next March.
The travel rule is the brainchild of the Financial Action Task Force (FATF), the global watchdog charged with combating terrorism funding and money laundering.
In South Korea’s case, the rule dictates companies involved in crypto transactions of 1 million won ($884) or more must share identities of all parties with regulators.
Adhering to the travel rule involves significant time and money (paying compliance officers, building and maintaining infrastructure, and the like).
So, rather than go it alone, South Korea’s top four exchanges decided to pool resources and develop an industry-wide platform.
In a joint statement, the exchanges reportedly said they hoped others would eventually join the system.
But they might be the only exchanges left
South Korea integrated the travel rule into its existing Act on Reporting and Using Specified Financial Transaction Information — the laws governing the sale, transfer, and storage of cryptocurrency in the country.
Lawmakers amended that act in March this year, forcing South Korean crypto exchanges and wallet providers to register with the country’s financial watchdog and fulfil key requirements:
- Secure a banking partner to give every user a real-name bank account.
- Gain certification of South Korea’s internet regulator (the Korea Internet and Security Agency).
- Submit company information to the country’s financial intelligence unit.
So far, the top four exchanges are the only platforms to comply, with many smaller firms unable to find banks willing to adopt them.
South Korean crypto platforms continue to drop altcoins
Meanwhile, many South Korean crypto exchanges have started to limit altcoin markets in a bid to appease prospective banking partners.
Upbit has already placed nearly 180 tokens on a watchlist of projects that don’t meet required safety standards for investors. Coinbit reportedly stopped trade for eight and is actively monitoring 28 more.
Exchanges say they’ve dropped smaller cryptocurrencies to avoid potential conflicts with regulators.