37 Crypto Exchanges Shut Down

New regulation for crypto exchanges in South Korea is now effective, forcing 37 exchanges to shut down abruptly. 

The Act on Reporting and Using Specified Financial Transaction Information requires crypto exchanges to obtain Information Security Management System (ISMS) certification and submit a report to the country’s Financial Intelligence Unit (FIU) by midnight on September 24. 

The new requirements force exchanges that want to offer trading in Korea won to form a partnership with a local bank to offer real-name accounts to users.

The Financial Services Commission (FSC), South Korea’s top financial regulator, said Saturday that 29 crypto exchanges are ISMS-certified and submitted a report to the FIU before the deadline. Their submissions will be processed within three months.

Only four out of 29 exchanges — Upbit, Bithumb, Coinone, and Korbit — have successfully partnered with banks to offer real-name accounts to their users. A bank partnership is required for exchanges to offer traders the ability to buy and sell cryptocurrencies in exchange for Korean won. The remaining 25 exchanges are only allowed to operate as crypto-only exchanges.

Gopax, Huobi Korea and Gdac tried to reach a deal from banks but to no avail, and will have to halt their Korean-won trading services.

The 29 exchanges are obliged to set up a system to adopt global anti-money laundering standards called the “travel rule.”

The travel rule is a global standard imposed by the Financial Action Task Force, an intergovernmental anti-money laundering watchdog, on virtual asset service providers such as cryptocurrency exchanges and digital wallet providers. 

The country’s virtual asset service providers are required to establish the travel rule system, which requires real-name verification of senders’ identities for international transfers, by March 25 next year.

Three exchanges — Bithumb, Coinone, and Korbit — launched a joint venture to develop a travel rule system together, while Upbit, the largest exchange in South Korea, announced its own system developed by its subsidiary.

The Act on Reporting and Using Specified Financial Transaction Information requires crypto exchanges to be equipped with ISMS and to form partnerships with banks by Friday.

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