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South Korean Cryptocurrency Exchanges Face New Reserve Fund Rules for User Protection Amidst Stricter Regulations

CryptoSouth Korean Cryptocurrency Exchanges Face New Reserve Fund Rules for User Protection Amidst Stricter Regulations

The Korea Federation of Banks will soon require South Korean cryptocurrency exchanges with real-name accounts to maintain a minimum reserve fund. These new rules stipulate a minimum fund of 3 billion won (about $2.26 million), effective from September. The aim is to safeguard users in case of unforeseen events like hacking.

Reports indicate that exchanges facilitating transactions between Korean won and cryptocurrencies must adhere to the reserve requirement. The reserves range from 3 billion to 20 billion won (approximately $2.2 million to $15 million). Exchanges are expected to maintain 30% of their daily average deposits or a minimum of $2 million in reserve, with larger exchanges like Upbit adhering to the 30% rule.

The guidelines also enforce stricter Know Your Customer (KYC) norms and fund transfer regulations. These policies, except for the reserve requirement, are set to be in place by January 2024. The Financial Services Commission’s Financial Intelligence Unit (FIU) has drafted these rules in response to calls from exchanges for clearer crypto regulations.

Major exchanges like Upbit and Bithumb seem ready to comply, but coin-only exchanges struggle due to capital limitations. Such exchanges have experienced reduced trading volume since the revised Specific Financial Information Act was introduced in 2021.

South Korea has been actively regulating the virtual asset market, with measures such as launching a cryptocurrency crime investigation unit and introducing the Virtual Asset User Protection Act. This move aligns with Asian nations’ efforts to balance innovation and investor security, while Western countries work on establishing comprehensive frameworks for digital asset regulation.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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