Crypto exchanges face bank and financial authority reviews to continue biz

2021.05.31 14:09:32 | 2021.05.31 15:16:54

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An exchange hosting won-based trade in digital coins must register with the Korean financial authority by Sept. 25 and could be forced to shut down if they do not meet the requirements in security and authentication system.

All digital currency exchanges are required to register with the Financial Intelligence Unit (FIU) under the Financial Services Commission by Sept. 25 to continue their business operations.

To qualify for registration, crypto exchange operators must hand in Information Security Management System certification. Of over 60 crypto exchanges, just 20 have been certified.

They also must prove real-name customer accounts at banks.

Currently, there are four exchanges in the country—Upbit, Bithumb, Korbit and Coinone— which only accept traders cleared by banks to open accounts for digital coins investment.

The exchanges would have to be separately reviewed by banks on the validity of the coins they serve, internal control, shareholder structure and financial state for partnership in account opening.

As Korean currency-based trade accounts for over 90 percent of the entire crypto trading, many smaller exchanges that fail to obtain real-name accounts from banks may inevitably close down.

Some exchanges are expected to file applications with the FIU as early as next month, suggesting that the first government-approved crypto exchange will start operating in as early as August as it takes about three months for the FIU review.

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Those who continue their operations without registering with the FIU will be subject to imprisonment of up to five years or a fine of up to 50 million won ($44,903).

Meanwhile, Korbit, one of the country’s four major coin exchanges, has become the first in the country to open the Non-Fungible Token (NFT) market.

An NFT refers to the metadata in block chain technology connected to digital art, creating assets that are instantly verifiable and transferable. Examples of NFT include crypto artwork, collectibles, game items, and financial products. When content creators register NFT artwork, consumers can purchase their favorite works with Ethereum through bidding.

According to statistics by cryptocurrency art analytics platform CryptoArt cited by Korbit, over 100,000 pieces of artwork have sold worldwide through NFT-based digital artwork trading as of early March, amounting to a total 200 billion won in value.

By Lee Sae-ha and Lee Soo-min

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