Starting in September, South Korean cryptocurrency exchanges will be mandated to set aside at least 3 billion won ($2.3 million) in reserves, according to guidelines released by the Korea Federation of Banks. According to local media outlet News1 today, this move is part of South Korea’s broader strategy to bolster consumer protection measures in the burgeoning crypto industry.
Strengthening consumer protection measures
The new guidelines, titled “Virtual Asset Real-Name Account Operation Guidelines,” stipulate that exchanges must hold the equivalent of 30% of their daily average deposits in reserves. These reserves are intended to “fulfill their liability for damages to users” in the event of a risk occurrence. The maximum limit for such funds has been capped at 20 billion won. Major Korean crypto exchanges, including Upbit and Bithumb, have already indicated their compliance with these new requirements.
Regulatory oversight Intensifies
South Korean authorities have been intensifying their regulatory oversight of the crypto sector. In June, lawmakers passed legislation comprising 19 crypto-related bills, granting the Financial Services Commission (FSC) and the Bank of Korea the authority to supervise crypto operators and asset custodians. The legislation also empowers authorities to enforce penalties for unfair trading of virtual assets. Furthermore, the FSC announced last month that domestic companies would be required to disclose cryptocurrency holdings starting next year as part of new accounting rules.
Also, last month, the Korea Financial Intelligence Unit (KoFIU) held a meeting to “strengthen the compliance capacity of virtual asset service providers.” This meeting came a day after launching an interagency investigation unit comprising at least 30 investigators from various agencies, including the Financial Supervisory Service and the National Tax Service. The unit aims to combat crypto-related crimes, which have been on the rise.
As South Korea tightens its regulatory grip on the crypto industry, the new reserve requirements serve as another layer of consumer protection. These measures align with the country’s efforts to provide a safer environment for crypto investors while combating illegal activities. With major exchanges like Upbit and Bithumb already on track to comply, the guidelines could set a precedent for other countries looking to enhance consumer protection in the crypto space.
