South Korean Banks to Follow New Crypto Restrictions
South Korea is introducing new banking restrictions to regulate crypto exchanges. The country’s bankers association will also hold a meeting to discuss new rules for reducing their liability on servicing crypto businesses.
South Korea Escalates Crypto Regulation
South Korea is bringing in new regulations for banks serving crypto customers.
On Sunday, the Financial Services Commission (FSC) announced that banks must classify crypto clients as “high-risk” and make them subject to stringent monitoring and KYC rules. The newly proposed FSC guidelines also require banks to report high-volume transactions from suspicious entities to the authorities.
The country’s banks will be required to report suspicious transactions to the authorities and authorize Know Your Customer (KYC) compliance before partnering with crypto exchanges.
A Korea Times report added that banks are looking for ways to mitigate the regulatory risks from servicing crypto exchanges. The Korea Federation of Banks has called a meeting to discuss new rules for exchanges to protect against crypto-related liability.
Crypto exchanges in South Korea are also required to seek a register with the Korea Financial Intelligence Unit (KoFIU), an anti-money laundering state agency, before Sep. 24, 2021. After that, the intelligence unit will review the exchange activities for three months.
According to the report, only four out of 60 exchanges operating in the country currently implement real-name identification. Others operate on a pseudo-name basis for clients.
The report also raised concerns that regulators may restrict the cryptocurrency listings to weed out lower cap coins during the registration process. It defined these coins as those “encompassing almost all cryptocurrencies except for a few top-traded ones.”
South Korea has been favorable to cryptocurrencies over the years. However, the recent euphoria in crypto marked the return of the so-called “kimchi premium,” which was a price increase of about 26% for cryptocurrencies. The premium attracted regulatory attention, leading the country to crack down on illegal trading activity across foreign exchanges. International organizations like FATF have also strongly recommended implementing KYC rules and transaction monitoring in recent years.
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