South Korea Implements New Reserve Requirements for Cryptocurrency Exchanges

South Korea has recently introduced new regulations for cryptocurrency exchanges, mandating that they maintain a minimum reserve of $2.3 million. These requirements aim to ensure the financial stability of exchanges and protect users in case of hacks or system failures.

Guidelines for Real-Name Account Operation of Virtual Assets

The guidelines, known as the “Guidelines for Real-Name Account Operation of Virtual Assets,” were published by the Korea Association of Banks in July. As per these guidelines, cryptocurrency exchanges with real-name accounts issued by banks must hold at least 30 percent of their average daily deposits or a minimum of 3 billion won ($2.26 million) starting from September 2023. The maximum reserve requirement is set at $20 billion ($15 million).

Implementation and Compliance Challenges

The reserve standard will be enforced from September, while other rules, such as KYC (Know Your Customer) regulations and authentication for collection transfers, will be implemented in January 2024. Major exchanges like Upbit and Bithumb are preparing to comply with these guidelines. However, smaller exchanges that operate solely in cryptocurrency markets without real-name accounts might struggle to meet the September deadline due to reduced transaction volume.

Some of these exchanges are currently in negotiations with local banks to obtain real-name account issuance in accordance with the revised FinTech Act of 2021. However, it is uncertain whether these negotiations will be concluded before the guidelines come into effect.

One such exchange, Hanpetco, which recently acquired a real-name account, may face difficulties in meeting the new reserve requirements. An anonymous representative from the virtual currency sector expressed concerns, describing it as the “last train” for Hanpetco Corporation.

Conclusion

The introduction of reserve requirements for cryptocurrency exchanges in South Korea is a significant step towards ensuring the stability and security of the cryptocurrency market. These regulations will help protect users and mitigate financial risks associated with exchanges. It remains to be seen how exchanges will adapt and comply with the new guidelines within the specified timelines.