New cryptocurrency regulation in South Korea will come into effect this week. As a result, more than 60 crypto exchanges operating in South Korea must notify users of a partial or complete trading ban.
Exchanges must register with the Financial Intelligence Unit by September 24. They must also provide a security certificate from an Internet security agency to continue functioning. Further, they must work with banks to verify that real-name accounts are maintained.
Mandate under the new regulation
Exchanges that have not yet registered must cease operations by September 24, while those that have registered but have yet to get banking relationships will be barred from trading in Won. Nearly 40 exchanges have announced that they will suspend all services. A total of 28 exchanges have security certificates but no bank partnerships.
Only four companies have registered and acquired partnerships, allowing them to make winning settlements: Upbit, Bithumb, Coinone, and Korbit. Some smaller exchanges, including ProBit, Cashierest, and Flybit, have already announced that they will stop trading in Won. They will focus solely on digital coins until they can get bank partnerships.
Countries cracking down on unregulated Crypto Trading
Cryptocurrencies have gained traction among people, both good and bad. While they allow good people to reap profits on their investments and allow seamless cross-border transactions, they also allow bad people to launder money, receive ransoms and stay anonymous.
Countries have also looked at cryptocurrencies as an enabler of money laundering and terrorist financing, and a huge risk to investors because of their volatility.
Police in China has arrested over 1100 people suspected of using cryptocurrency for money laundering and Internet scams. The IRS has sought statutory authority from the U.S. Senate to collect more information on cryptocurrency transfers, which it is unable to track and tax.
In the U.K., the Financial Conduct Authority (FCA) said that a significantly high number of cryptocurrency firms are failing to satisfy money laundering laws. This is forcing firms to withdraw applications to register with the authority.
While Turkey has not banned cryptocurrencies, it has banned their use for purchases.
On the other hand, Ukraine has passed a law that regulates cryptocurrency and ensures the safety of users. The law permits citizens to possess, exchange, and trade cryptocurrencies on domestic and international platforms. They must, however, register themselves in Ukraine. El Salvador has gone even a step further, by accepting Bitcoin as a legal tender. The International Monetary Fund has remarked that it is perhaps “a step too far.”
The Situation in India
The Reserve Bank of India (RBI) has also said that it has major concerns on cryptocurrency. Nevertheless, in view of the Supreme Court judgment quashing its order mandating banks to stop providing services to crypto exchanges, it has asked banks to let customers transact with exchanges.
It has asked banks, however, to carry out customer due diligence in line with KYC, Anti Money Laundering, Combating of Financing of Terrorism as well as PMLA Act, 2002 and FEMA.
It was recently reported that despite the lifting of ban, SBI is blocking crypto exchanges from receiving funds via UPI.