South Korean To Implement New Reserve Requirements for Crypto Exchanges
From September, South Korean cryptocurrency exchanges will be required to maintain a minimum reserve of 3 billion won ($2.3 million) in bank accounts. This move comes as South Korea’s Financial Services Commission (FSC) aims to strengthen oversight of the country’s cryptocurrency market and prevent money laundering and other illegal activities. The new guidelines by KFB (Korea Federation of Banks) apply to exchanges that have “real-name” bank accounts, which are accounts that are linked to the user’s identity.
The Virtual Asset Real-Name Account Operation Guidelines published by the Korea Federation of Banks stipulate that exchanges must hold in reserves an amount equivalent to 30% of their daily average deposits or 3 billion won, whichever is larger. However, if 30% of the daily average deposit exceeds 20 billion won, only up to 20 billion won can be accumulated as a reserve. The reserve requirement is intended to ensure that exchanges have sufficient funds to cover any losses or liabilities that may arise.
The banking sector has included several other standards in its operating guidelines, such as KYC and additional authentication for collection transfers. However, the operating guidelines were decided to be implemented from January 2024, but among the various standards, only ‘reservation accumulation’ was decided to be implemented early.
The new regulations have been met with mixed reactions from the cryptocurrency industry in South Korea. Some exchanges, like Upbit, have welcomed the move as a step towards greater transparency and stability in the industry.
However, for small exchanges, the reserve requirement may place a financial burden.
It is worth noting that the reserve requirement only applies to South Korean cryptocurrency exchanges. However, given the country’s significant role in the global cryptocurrency market, the new regulations may have wider implications for the industry. The FSC will continue to monitor the cryptocurrency market and take further measures if necessary.