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- Exchanges have been ordered by the Korean financial regulator not to allow employees to trade on their platforms.
- Bithumb has announced that it has implemented the new law.
South Korea has sought to toughen its stance on regulating local crypto firms following recent actions taken by foreign regulators. As part of the updated law, local crypto exchanges have been instructed to ban their employees from trading on their platforms in a bid to heighten internal regulation and improve transaction efficiency. This follows the directive by the Korean Financial Services Commission (FSC) for exchanges to register with the local financial authorities before September 2021.
Bithumb, one of the largest crypto exchanges in the country, is one of the known exchanges to have implemented the law to completely ban its employees from buying or selling on the platform starting next month.
Last month, a written statement regarding the account withdrawals was submitted to employees of the company. The staff also submitted a written oath to comply with the new directive.
From this month on, we will strictly manage whether or not employees comply with the regulations through continuous monitoring, self-audit, and internal reporting system operation.
Over the past few months, Bithumb has imposed a series of restrictions on staff including a ban on trading during working hours, and trading in an asset 72 hours after listing. Also, several staff-related proactive measures have been taken to prevent market manipulation, unfair trading practices, and data leak prevention years ago.
Exchanges that do not implement the law after September 25 could be fined as high as 100 million won (around $88,000) by the FSC if an employee is found trading on the platform
Smaller exchanges are at risk of shutting down
The law, in addition, orders local crypto exchange firms to partner with local banks to open accounts using the real names of customers by September 24. It is expected that Upbit and Korbit could follow Bithumb to impose the law. In March, the FSC amended its financial reporting rules to instruct exchanges to submit regular transaction reports with the FSC’s Financial Intelligence Unit (FIU).
According to reports, bigger exchanges will have no problem meeting the requirements. However, as many as 50 smaller exchanges may be forced to shut down. Recently, about 20 exchanges had a closed-door meeting with the FIU to express their concerns about the challenges that make it difficult for them to meet the real-name account requirement. Others are also contemplating suing the government for refusing to take responsibility for the recent regulatory pressure. One anonymous crypto exchange representative expressed his concerns to reporters:
These days, banks are refusing to initiate their cryptocurrency exchange verification processes without clear reasons and most exchanges are failing to get a chance to prove themselves. […] The Financial Services Commission needs to step in right away.
