Cryptocurrency exchanges can sue the South Korean government for “money transfers”
With the implementation of new regulations by the South Korean Financial Services Commission (FSC), many smaller cryptocurrency exchanges in the country fear that they will have to close.
These rules require that every exchange must prove that they have a real name account with a Korean bank by September 24, 2021 – the difficulty is that local banks restrict participation in the banks’ trading platforms.
Smaller exchanges are now considering suing the government for allegedly not responsible for the majority of their regulatory payments, according to a report by Business Korea. Under the new FSC regulations, domestic banks are required to refuse their services to any crypto exchange customers who they believe are not complying with ID verification measures or reporting suspicious activity.
In the words of an industry official, the government and tax authorities have essentially passed responsibility for auditing cryptocurrency exchanges to banks, which are “responsible for issuing real-name accounts”.
With the Federation of Banks of Korea and several commercial lenders appealing the new regulations to the FSC – fearing their own potential liabilities to financial crime from the death of cryptocurrency exchanges – the government could soon be under pressure from all sides.
Business Korea stated that a number of unnamed exchanges are considering filing constitutional complaints against the government and financial regulators for finding that they have shirked responsibility for regulating the industry and ensuring best practices.
K Bank, NH Bank and Shinhan Bank are all set to participate in the study of the big names in the Korean crypto industry: UPbit, Bithumb, Coinone and Korbit. However, a similar commitment is withheld from lesser-known platforms for which the banks are not responsible. An anonymous cryptocurrency exchange representative told reporters:
“Today banks are refusing to initiate their verification process for crypto exchanges for no apparent reason, and most exchanges have no chance to prove themselves. […] The Financial Services Commission must intervene immediately. “
Related: South Korean banks have to classify crypto exchange customers as “high risk”
Twenty crypto exchanges in South Korea held a closed session with the FSC’s Financial Intelligence Unit earlier this month, during which they raised concerns about obstacles in responding to inquiries about real name accounts, among other things. Then for the time being only the “Big Four” have a chance of securing the future according to the new guidelines.
In addition to the lack of participation, the fees for setting up such a banking partnership are very expensive for most of the smaller operators. It is estimated that the changes made by the new rules as part of new crypto-specific regulations will affect around 60 exchanges in the country.