40 out of 60 S. Korean crypto exchanges might shutdown due to regulatory non-compliance
The Financial Services Commission (FSC) of South Korea sees 40 out of 60 crypto exchanges closing down due to registration obligations’ violation, per FT. Local “Kimchi” coins stand to suffer as trading them won’t be possible on exchanges—possibly bringing losses of over $2.6 billion. Instances of a lack of compliance by various exchanges worries the FSC, even after an earlier warning issued by the Financial Intelligence Unit (FIU).
September 24 (2021) is the deadline for foreign cryptocurrency exchanges to register with the AML (anti-money laundering) watchdog, the FIU. The FIU had announced in July 2021 to have sent reminder compliance notices to 27 cryptocurrency exchanges serving South Korean nationals. The penalty upon non-compliance is five years of imprisonment and a fine of up to 50 million Korean Won (approximately $43,000).
In a communication submitted to the parliamentary National Policy Committee (NPC), the FSC stated:
Business activities carried out by overseas cryptocurrency exchanges targeting local customers without reporting to the Financial Intelligence Unit — an anti-money laundering unit under the Financial Services Commission — are illegal under the revised Act on Reporting and Using Specified Financial Transaction Information.
South Korea’s fresh version of the Special Funds Act came into legal existence on March 25 (2021). Its enforcement is due to commence from September (2021) onwards. The government (policymakers) must realize that these exchanges might be ill-equipped to comply with the legal obligations. Contradictory variances should not exist among banks (fearing money laundering, hacking, fraud, etc.) and exchanges, in their genuine compliance efforts. The resultant potential losses to be sustained by the local Kimchi coins’ segment would entirely wipe-out their liquidity.