The government of South Korea is taking steps to formalize the position of cryptocurrency exchanges as legitimate financial institutions in the country. Local news outlets report that government will now classify the exchanges under “Cryptocurrency Exchange and Brokerage” which will give allow them to be regulated by financial regulators.
Cryptocurrency operators in South Korea have long been treated as communication vendors and as such required minor licenses to operate.
The government have mulled over cryptocurrency regulations and policies in the past but have come short of a decision to regulate. The was probably because financial regulators were worried that a cryptocurrency regulation would appear as the government’s endorsement of cryptocurrency activities in the country.
Following the high-profile attacks on cryptocurrency exchanges Bithumb and Coinrail last month, authorities must feel the need to do more; perhaps to release practical regulations for crypto operators.
According to Moon Byung-ki, director at SK Infotech high-tech department, a subsidiary of the biggest telecoms player in the country, lack of regulations have allowed exchanges to operate in the country without adequate security systems in place. He said that these small to medium-sized cryptocurrency exchanges delay the implementation of necessary security measures in favor of product expansion.
With the change, however, cryptocurrency exchanges in the country will need approval from cybersecurity agencies and financial regulators. Exchanges will not be allowed to operate unless they have these approvals from government agencies.
The new regulations will rejig the local cryptocurrency market as exchanges will most likely be required to observe strict customer verification processes. Regulations will also include Know Your Customer (KYC) policies and Anti-Money Laundering (AML) policies.
It is believed that the regulations will make investors more comfortable and attract institutional investors.