South Korea Regulation | Bithumb to Ban Unverified Wallets, Yet Allows Withdrawals to Binance.US and Bybit?

South Korea's major exchange, Bithumb, announced on 1/25 that starting from 1/27, users will be prohibited from withdrawing funds to unverified wallets, becoming the second Korean exchange after Coinone to ban non-KYC addresses.

According to reports from early December last year, the South Korean government is set to officially ban users from withdrawing funds from cryptocurrency exchanges to non-KYC wallets starting in March 2022. This means that South Korean cryptocurrency investors may face some restrictions when participating in areas such as DeFi, NFTs, DAOs, etc., in the future.

On December 30th, the South Korean exchange Coinone stated that to ensure users do not use cryptocurrencies for money laundering or other illegal activities, starting from January 24, 2022, users will be required to register their wallets before being able to withdraw funds.

Bithumb, the latest South Korean exchange to follow suit, has implemented the following new regulations:

• Withdrawal address registration: The recipient's personal information is required, and withdrawals are only allowed after approval.
• Internal transfers on Bithumb also require address registration.
• Approved withdrawal addresses include Binance.US, Kraken.US, Bitstamp, Blockchain.com, Bybit.

According to a report by South Korean media, exchanges changed their rules under pressure from NongHyup Bank, which strongly demanded that exchanges block non-KYC wallets.

Nevertheless, users can still transfer funds to wallets like MetaMask, Coinbase Wallet, etc., which do not require KYC, by first withdrawing funds to approved addresses on the aforementioned foreign exchanges and then making two transfers.

This situation highlights the lack of a coherent regulatory framework. Until comprehensive regulations that have the consensus of the majority of governments in place, cryptocurrencies will face challenges in complying with anti-money laundering laws. However, robust regulations will be crucial for the widespread adoption of cryptocurrencies.