Upbit has become the first South Korean crypto exchange to officially apply for an operating license – with the nation’s financial regulator confident that “at least one or two” others will follow suit before the end of this month.
The move is a major statement from the crypto sector, which had reeled last week from news that all of the exchanges hit by a recent regulatory audit had failed their due diligence checks.
Per Yonhap, as well as SME Daily and Dailian, Upbit appears to have renegotiated its (very successful) banking contract with K-Bank, a KT-backed neobank that has seen account registration skyrocket thanks to its Upbit deal.
Under the terms of the nation’s first piece of crypto-specific legislation – which comes into force on September 24 – all exchange clients must have bank accounts verified by real names and social security numbers.
Banks have been reluctant to offer such contracts to exchanges, particularly after being told by the government that offering such services will mean they must absorb all associated money laundering-related risks.
But Upbit’s seemingly bold move, in submitting its documentation over a month ahead of the deadline, could well galvanize the sector – just as nerves were beginning to jangle among domestic investors.
The Financial Services Commission (FSC)’s Vice Chairman was quoted as stating that “one or two” trading platforms appeared ready to submit their applications before the end of August.
But the process does not end here. Upbit will face a tense wait of up to three months as the FSC’s Financial Intelligence Unit (FIU) reviews its documents. This review could take up to three months, the regulator has stated – meaning there is still the very real prospect that large exchanges may have to suspend their services for weeks.
Upbit’s biggest rival, Bithumb, is likely to be next in line to submit its paperwork, an industry source told Cryptonews.com on condition of anonymity. Korbit and Coinone, the remaining members of the “big four” trading platform group, are also hopeful of submitting well ahead of the deadline should their existing banking partners give them the green light.
However, the regulator appears to be preparing for the very real possibility of much of the chasing pack behind the “big four” simply not making it. The FSC appears braced for exchange closures – and wants to mitigate the fallout by issuing protocols for exchanges that want to suspend their services.
Politicians and industry insiders have warned of a “shutdown crisis” and “intentional bankruptcies” likely to break on the eve of the deadline – something that even regulators have been reluctant to rule out.
But Money Today reported that the FSC and FIU had sent a joint letter to “about 40 exchanges,” asking them to conform to a set of refund procedures “in case of business closure,” and issue clear notices to their customers if they do decide to shut up shop.
The FSC and FIU warned exchanges that they must give “at least seven days’ notice before closing,” during which time customers should be allowed to conclude their transactions and membership with the trading platforms.
They also insisted that “support systems” should be maintained after closure so that users can “withdraw money for at least 30 days after the end of transaction support.”
And the regulators also demanded that should users wish to “complain about damages caused during business closures,” a procedure needed to be put in place to assist legal claims.
Trading platforms were told to maintain their existing websites even if they close in order to provide customers with information such as contact details and details about how they could get in touch with customer service staff.
Last week, the FSC turned down a last-ditch industry bid to extend the deadline by a further six months.
– All of South Korea’s Crypto Exchanges Fail their Regulatory Audits
– ‘Nerve-wracking’ Wait for S Korean Crypto Investors, 70% of Crypto Firms’ Sites Down
– South Korean Crypto Exchanges Plead for 6 Months of Regulatory Mercy
– S Korean Regulator to Force Crypto Overseas Exchanges to Abide by its Rules
– Smaller South Korean Crypto Exchanges Begin to Shutdown, Suspend Services
– Signs of a Crypto Regulatory Climbdown from South Korea’s Ruling Party