Crypto Exchanges in South Korea To Hold Minimum Reserves Starting September

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Starting in September, South Korean cryptocurrency exchanges that offer real-name accounts will be required to maintain a minimum reserve fund. A step towards enhancing user protection and guarding against hacking and system failures. This move is part of South Korea’s ongoing efforts to regulate the cryptocurrency market.

Strict Laws to Protect User Interest: Here’s the Insight

While other countries are still grappling with crypto rules and frameworks. Going miles away, South Korea introduced a pioneering legislation in June, known as the Virtual Asset User Protection law, encompassing 19 bills focused on the crypto industry. The legislation aims to create a structured framework for digital assets and enhance investor safeguards.

Under the new regulations, exchanges facilitating transactions between the Korean won and cryptocurrencies must hold reserves ranging from 3 billion to 20 billion won (approximately $2.2 million to $15 million). As per law exchanges need to maintain either 30% of their daily average deposits or a minimum of $2 million in reserves, whichever is higher. 

September Deadline?

Besides the reserve requirement, the regulations will also impose stricter Know Your Customer (KYC) norms and fund transfer rules. These changes are set to be implemented by January 2024, except for the reserve requirement, which starts next month.

On the other hand, crypto exchanges like Upbit and Bithumb are ready to comply with the new rules. However, coin-only exchanges are supposed to face challenges due to limited capital, partly caused by decreased trading volumes following the introduction of the revised Specific Financial Information Act in 2021. 

Expanding Cryptocurrency Oversight

On a wider spectrum, South Korea’s regulatory innovations are standing out. Recently in G20 India has also talked about bringing one regulatory framework for all nations. Crypto Should not be limited to one country or one region. 

Learning lessons from Samuel Bankman Fried’s FTX collapse in November 2022, South Korean regulatory bodies have become more stringent in safeguarding customer funds. In line with this, they are actively pushing crypto rules for exchanges operating within the country.

This calls for a twofold impact. Firstly, it will increase customer faith in the system and prioritize the protection of their funds and assets. Secondly, these regulatory steps are likely to stimulate increased adoption of crypto trading across various exchange platforms in South Korea. This combination of enhanced security and clear guidelines can contribute to a more robust and trustworthy cryptocurrency trading environment.