It is truly remarkable day for the whole cryptocurrency community scattered all over the globe. Following a tough year of legal procedures and bans imposed on a trading of digital assets and ICOs, South Korea has finally made its mind and decided to apply to cryptocurrency exchanges the same regulatory framework it uses for banks and other financial institutions.
For recent years, a huge and unprecedented growth in cryptocurrency market along with major volatility and price swings fueled by speculative trading has made the financial authority of South Korea to elaborate measures to defend its economy.
Being at the forefront of cryptocurrency adoption where 1 out of 2 people is engaged in either crypto investing or trading, South Korea stonily banned all the ICO’s and cryptocurrency trading within their country, yet the cryptocurrencies remained legal waiting for better days to come.
This week, South Korea officially recognizes the cryptocurrency exchanges as the legal entities. Reportedly, after a raft of debates the government of South Korea has come to a consensus to recognize crypto exchanges as regulated financial businesses, creating a new industry dedicated to cryptocurrency trading platforms.
This is a significant step for cryptocurrencies that is going to have far-reaching implications. More specifically, this regulatory framework will require cryptocurrency exchanges to comply with strict Know-Your-Customer (KYC) rules, Anti-Money Laundering (AML) regulations, as well as customer verification policies.
It is likely existing cryptocurrency trading platforms such as Bithumb, Coinone, and Korbit will also be required to overhaul security measures and revamp internal management systems in order to remain in compliance with these new government-mandated regulations.
Despite all of the hassle, South Korean market analysists are positive on cryptocurrency trading in long-term prospective since the increased legitimacy for the cryptocurrency sector will open the floodgates for institutional investors, who may very well bring with them massive amounts of capital. It will also increase cryptocurrency’s attractiveness to retail traders, and allow digital assets to be considered an emerging asset class.
Seeking to boost cryptos recovery, South Korean authorities will also alter existing regulations to facilitate the development of decentralized applications and base layers such as Ethereum and EOS.
On the other side of spectrum, newly introduced regulation sentences to the death smaller cryptocurrency exchanges. Previously, crypto exchanges were considered as communication vendors and trading platforms were only required to purchase 20$-worth licenses to operate. Now they will have to receive approval from South Korean cybersecurity authorities, as well as the department of financial intelligence.
Speaking on the benefits of high-standard security requirements Moon Byung-ki, SK Infotech high-tech department director, a subsidiary company of South Korea’s biggest telecommunications conglomerate SKT, said these measures are weeding out exchanges that used to operate in the country without any security system in place.
The fact does stand that small to medium-sized cryptocurrency exchanges delay the implementation of necessary security measures and are only focusing on business expansion. However, in the upcoming months, these exchanges will not even be permitted to operate regionally unless they successfully obtain approval from local government agencies.
Hopefully, increased security requirements will mean that large-scale hacking attacks such as those affecting Bithumb and Coinrail will be a thing of the past.