South Korean crypto exchanges prepare for $2.3 million reserves requirement

• The guidelines directed exchanges to allocate at least 3 billion won or an equivalent of 30% of their daily average deposits as reserves.
• The legislation also empowers authorities to impose penalties in cases involving unfair trading practices.

South Korean cryptocurrency exchanges are gearing up to implement a new regulatory requirement that mandates them to reserve a minimum of 3 billion won (approximately $2.3 million) in bank accounts as of September. This move comes as part of South Korea’s intensified efforts to enhance consumer protection measures within the growing crypto industry.

Notable exchanges in South Korea, including Upbit and Bithumb, seem to be aligning themselves with the new regulations, according to recent reports from local media outlet News1. These requirements were outlined in guidelines released in July by the Korea Federation of Banks, indicating the crypto industry’s increasing engagement with regulatory authorities.

The guidelines, aptly named “Virtual Asset Real-Name Account Operation Guidelines,” lay down the expectation for cryptocurrency exchanges to allocate at least 3 billion won or an equivalent of 30% of their daily average deposits as reserves.

This financial buffer is intended to ensure that exchanges can fulfill their obligations to users in the event of any risk incidents. However, there’s a cap set on the size of these funds, limiting them to 20 billion won in accordance with the provided guidelines.

New Regulation aims to strengthen consumer protection in the growing crypto industry

The heightened scrutiny over the cryptocurrency industry in South Korea is a result of legislative efforts aimed at bolstering investor protection. In June, the nation’s lawmakers passed a package of 19 bills centered around crypto-related matters. These bills grant the Financial Services Commission and the Bank of Korea the authority to oversee both cryptocurrency operators and asset custodians.

Furthermore, the newly enacted legislation empowers authorities to impose penalties in cases involving unfair trading practices within the realm of virtual assets. This legislative overhaul reflects South Korea’s commitment to creating a more transparent and secure environment for its crypto investors.

Adding to these regulatory changes, the Financial Services Commission announced its plans last month to introduce a requirement for domestic companies to disclose their cryptocurrency holdings.

This disclosure requirement is set to take effect next year and is part of the broader effort to enhance transparency within the crypto space. In addition to revealing cryptocurrency holdings, crypto issuers will be obligated to provide comprehensive information, encompassing token specifics, business models, and internal accounting policies.