South Korean cryptocurrency exchanges may file a lawsuit against the government. Industry representatives say that authorities and financial regulators are shirking their duties, according to Business Korea.
Under amendments to the law that bring cryptocurrency trading fully within the regulatory framework, by September 2021 local bitcoin exchanges were required to register with the Financial Services Commission of South Korea (FSC). To do so, they must also ensure compliance with KYC procedures in cooperation with partner banks.
In April 2021, FSC chair Eun Sung-soo warned about the risk of closing all local cryptocurrency exchanges. Registration with the agency was completed only by the country’s largest platforms — Bithumb, Upbit, Korbit and Coinone.
According to Business Korea, participants in the industry share this view. Lending institutions are reluctant to expand partnerships with trading platforms, fearing additional scrutiny from financial regulators.
In May, the Korea Federation of Banks issued guidelines that its members should follow in assessing crypto exchanges. The document emphasises security protocols of trading platforms, their resilience to hacking attacks, token listing standards and KYC procedures.
Reportedly, K-Bank, Nonghyup Bank and Shinhan Bank are already conducting checks on the crypto exchanges of the \”big four\”, but banking institutions do not want to assume responsibility for less well-known platforms.
\”Banks refuse to initiate the process of vetting crypto exchanges without a clear explanation of the reasons. Most platforms have little chance of passing the procedure. The Financial Services Commission must intervene immediately,\” said to the publication a representative of an unnamed platform.
As a result, a number of exchanges are considering filing a suit against the government and financial regulators, according to the report. In their view, it is the authorities who are responsible for screening crypto-related business, but they are shirking their duties, shifting responsibility onto banks.
Earlier, D.Street wrote that in early June the FSC held a closed meeting with representatives of 20 cryptocurrency platforms. Industry participants noted that they faced difficulties in meeting regulator requirements.
In the first quarter of 2021, South Korean banks processed about $57.9 billion in transactions on verified accounts linked to crypto exchanges, exceeding the total for 2020.
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