Distinguishing Cryptocurrency Exchanges... Even 20 More Face Expulsion Risk

Financial Services Commission Holds Private Meeting with Cryptocurrency Exchanges
Consulting on Reporting under Special Financial Transactions Act
Banking Sector Still Reluctant to Partner with Real-Name Accounts, Raising Risk of Mass Closures

[Asia Economy Reporter Jin-ho Kim] The Financial Services Commission (FSC), the main government body responsible for managing and supervising virtual currency operators, convened major virtual currency exchanges. This was the first event since the government announced its "Virtual Currency Transaction Management Plan" on the 28th of last month. Although the meeting was arranged for consultation on registration and reporting ahead of the enforcement of the Act on Reporting and Using Specified Financial Transaction Information, the banking sector still hesitates to partner with these exchanges, leaving the possibility of a mass closure unchanged.

According to the financial sector on the 4th, the Financial Intelligence Unit (FIU) under the FSC held a meeting yesterday at the Bankers' Hall in Myeong-dong, Seoul, with 20 major virtual currency exchanges including Upbit, Bithumb, Coinone, and Korbit.

The closed-door meeting was organized to specifically explain the government's stance on managing virtual currency operators and to guide future institutional improvements. Given that FSC Chairman Eun Sung-soo recently emphasized to reporters that "once exchanges enter the (registered exchange) framework, investment funds will naturally be protected," it is interpreted that the FSC is actively responding to protect consumers.

Notably, only 20 virtual currency exchanges attended the meeting. Considering that there are reportedly around 200 virtual currency exchanges, only a small number were invited by the financial authorities.

The commonality among these exchanges is that they have obtained Information Security Management System (ISMS) certification. Under the Act on Reporting and Using Specified Financial Transaction Information, virtual currency operators must secure ISMS certification and real-name verified deposit and withdrawal accounts with banks by September 24 to register.

The fact that only exchanges meeting certain criteria were invited has led the industry to speculate that the FSC is taking a first step in sorting the wheat from the chaff in virtual currency management and supervision. This reflects the reality that many small-scale operators lack sufficient anti-money laundering capabilities, and even those of a certain size find it difficult to meet the stringent registration requirements. In fact, with the grace period for the Act on Reporting and Using Specified Financial Transaction Information just over three months away, no exchanges have completed registration.

There is also analysis that the financial authorities are effectively applying a "too big to fail" principle to the virtual currency industry, encouraging the consolidation of weak small and medium-sized exchanges. By preserving these dominant exchanges, consumer damage from mass closures in the market can be minimized.

However, despite the financial authorities' consulting efforts, concerns remain that a significant number of virtual currency exchanges will close en masse by the end of September when the grace period for the Act expires. For small and medium-sized exchanges in poor condition, it is practically difficult to pass the 85 evaluation items of the ISMS. Even exchanges with ISMS certification still face challenges in partnering with banks to issue real-name accounts.

Currently, only four exchanges?Upbit, Bithumb, Coinone, and Korbit?meet both key registration requirements under the Act: ISMS certification and partnerships with banks for real-name account issuance. A financial sector official stated, "Banks not currently partnering with exchanges (KB Kookmin Bank, Hana Bank, Woori Bank) have internally agreed not to plan partnerships in the future," adding, "Although there is a customer acquisition effect, the perception of high risks such as money laundering and hacking incidents is significant."

This content was produced with the assistance of AI translation services.