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Korean FSC Orders Banks to Mandate ID Verification for Crypto Clients

www.financemagnates.com 14 June 2021 09:19, UTC
Reading time: ~2 m

South Korea has doubled down its efforts to regulate the booming cryptocurrency industry. The Financial Services Commission (FSC) has mandated banks to classify crypto exchanges as high-risk clients and ordered them to strengthen financial transaction monitoring and user ID verification, The Korea Times reported.

The regulator further ordered the regulated banks to deny services to customers who refuse to comply with the ID verification process and also report suspicious financial transactions to the country’s anti-money laundering unit.

The guidelines came ahead of the mandatory licensing and compliance all local South Korean crypto exchanges have to go through before September 24.

The new FSC order is believed to impact around 60 small-scale cryptocurrency exchanges operating in the country without regulatory permission. Currently, only four major South Korean crypto exchanges are operating in full compliance with the lenders.

The regulatory unit has plans to terminate all transactions made using borrowed or fake accounts after this month. According to the regulator, the new guideline will ensure the protection of the crypto investors‘ funds in case the exchange goes bust.

“Banks are essentially forced to take responsibility for issuing real-name accounts. It, therefore, is reasonable that there should be some immunity for undertaking the dangerous and costly task,” the publication quoted an industry official.

Regulation Is Priority

South Korea is one of the major cryptocurrency markets, and the country is bolstering control on many fronts in the industry, from taxation to regulation. The Korean regulators are seeking data from the banks to know the exact number of crypto exchanges operating in the country.

Non-compliant exchanges will expectedly face regulatory actions. Meanwhile, many small crypto exchanges in the country have shuttered in the past few months citing the lack of banking support.

The local publication further pointed out that over 90 percent of crypto investments in the country are made through altcoins, which are deemed riskier than Bitcoin due to volatility.

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