Korean exchanges will need to prepare a reserve of 3 billion Korean won, Upbit and Bithumb respond they will comply.

According to a report by News1, the Korean Federation of Banks' "Real-Name Account Operation Guidelines" will advance the implementation of the "30 billion Korean won reserve fund" for exchanges starting in September. Some fiat currency exchanges have indicated that they are ready for this change. However, the large amount of funds required may put some small and medium-sized exchanges in financial jeopardy due to compliance issues.

Recap: South Korea passes the "Virtual Asset Protection Act"! Local exchange association implements a cryptocurrency alert system

South Korean Exchanges Required to Prepare 3 Billion Korean Won Reserve

The Korea Federation of Banks announced last month that the "Virtual Asset Real-Name Account Operation Guidelines," set to take effect in September, will require cryptocurrency exchanges to prepare a reserve of at least 3 billion Korean Won, approximately 2.3 million US dollars or 30% of the average daily deposits, whichever is higher, to ensure compensation for user assets in the event of high market volatility or hacking attacks.

The guidelines also include stricter user identity verification (KYC) and additional verification measures for transfers, which will be implemented starting January next year.

The Financial Services Commission (FSC) in South Korea will also incorporate these guidelines into regulations to ensure exchanges comply with real-name account requirements.

Upbit and Bithumb Respond: Prepared for Compliance

As the two largest exchanges in South Korea that have already implemented real-name account rules, Upbit and Bithumb have publicly stated that they are prepared and will follow the guidelines.

According to data from CCData, Upbit's monthly trading volume surpassed Coinbase and OKX last month, second only to Binance. It grew by 42.3% compared to June, reaching 29.8 billion US dollars and a 5.8% market share, showing significant growth.

Small and Medium Exchanges Facing Compliance Crisis

Due to amendments to the Special Financial Transactions Act, some exchanges are unable to provide fiat-to-cryptocurrency services, leading to a sharp decline in trading volume and losses. As a result, many small and medium exchanges may be on the verge of collapse.

It is evident that for these exchanges, 3 billion Korean Won is a significant amount of capital. However, failure to meet the minimum standards outlined in the guidelines will pose a challenge to the compliance path of these exchanges.

Industry experts have commented:

Small and medium exchanges have adjusted their business operations accordingly, but due to the lack of a large sum of 3 billion Korean Won, more and more exchanges will be forced to shut down.

Frequent Regulatory Actions in South Korea

Previously, according to a report from Yonhap News Agency, since last year, the authorities in Cheongju City, South Korea, have been requesting data from 7 cryptocurrency exchanges including Upbit and Bithumb to investigate tax delinquents and facilitate the seizure and retrieval of their cryptocurrency assets.

It is reported that information on cryptocurrency holdings of over 8,500 users with tax arrears exceeding 1 million Korean Won will be disclosed.

Authorities have stated that cryptocurrency assets have been used as illegal means for tax evasion and hiding money flows, and they will make every effort to investigate the matter.