Google Play will apply updated policies later this month that require foreign virtual asset exchanges to complete formal registration procedures with South Korea’s Financial Intelligence Unit (FIU) to retain their availability in the country’s app market.
According to local news publication Korean News 1, the policy change was disclosed by industry officials on Thursday, who said Google notified developers it would revise its rules governing virtual asset exchanges and software wallets.
The updated standards take effect on January 28 and apply to all apps distributed through Google Play in South Korea. Only platforms that comply with domestic financial laws and complete the FIU’s virtual asset service provider process will be allowed to list or update apps.
Virtual asset services app market controls to take effect in two weeks
Per the South Korean government’s new rules in conjunction with Google, overseas exchanges that would like to operate through Google Play in South Korea must complete “a repair” of their virtual asset business report. This process requires the establishment of an anti-money laundering framework and the acquisition of an Information Security Management System certification from the Korea Internet & Security Agency.
Economists believe the updated framework could push away several global exchanges like Binance and OKX from Korean users, because they may struggle to meet the requirements in time.
In March last year, 17 foreign platforms were suspected of breaching the Special Financial Information Act, prompting authorities to ask stores to block downloads and updates from the apps. However, users could still access the platforms through web browsers because the Korea Communications Standards Commission delayed website blocking.
“In the past, financial authorities asked telecommunication companies to block sites, but this time, Google blocked the app distribution channel itself as a policy,” one government official told Mkr Korea. “Domestic investors who were mainly active in overseas exchanges may experience considerable inconvenience in moving assets or monetizing them.”
Another pain point for developers was whether submitting documents to the FIU would be sufficient to satisfy Google’s requirements. Google clarified the issue in comments to News 1, saying the developer interface used to register apps requires proof that the report repair process has been completed.
Financial applications, including crypto trading platforms, typically require updates to function, so without the ability to update through Google Play, their trading features, asset transfers, or security patches would face downtimes.
Moreover, South Korean financial authorities have simultaneously doubled down on inspecting domestic virtual asset operators’ shareholders and on-site local offices. This, according to opponents of how the government is handling foreign business, makes it even harder for overseas exchanges to pass the FIU’s standards.
Domestic exchanges are currently barred from virtual asset futures trading, so Korean investors use globally available platforms to trade derivatives. If access to those platforms is capped through app distribution controls, local investors would struggle to manage positions or move funds.
The app store rules update comes against the backdrop of industry unease, started by South Korea’s Digital Asset Exchange Alliance issued a statement opposing government consideration of limits on shareholder stakes in crypto exchanges. The group has forwarded its complaints on behalf of the country’s five largest platforms, Upbit, Bithumb, Korbit, Coinone, and Gopax.
In a public statement shared on Tuesday, the alliance warned that proposed ownership caps could “significantly impede” the digital asset market’s growth. It is proposed that changing private company ownership structures would weaken the foundations of the industry, decentralization.
Earlier this month, the Financial Services Commission reportedly floated a proposal to cap shareholder stakes at between 15% and 20%. However, naysayers believe such limits to existing companies could destabilize an already established business model.
“Unlike securities, digital assets circulate across borders without restriction,” DAXA said. “If investment in domestic exchanges is not sustained, it could lead to a loss of global competitiveness, prompting users to migrate to overseas platforms.”
The alliance also blasted the idea that dispersing ownership would improve oversight, saying major stakeholders carry the responsibility for safeguarding user assets.
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Source: https://www.cryptopolitan.com/south-korea-restrict-overseas-exchanges/