Digital currency exchanges in South Korea are preparing to sue the government over allegations it is shirking its responsibilities over a new regulatory framework, which some have said is applying undue pressure to companies operating in the sector.
New rules being implemented by the Financial Services Commission (FSC) are reported to be causing significant worries for smaller digital currency exchanges in the country, which some fear could lead to a wave of closures.
Among the new rules are a requirement for users to hold real name accounts at a Korean bank by September. However, banks are not yet prepared to conduct the required risk assessment on smaller exchanges, leaving only the country’s largest exchanges able to qualify under the new requirements.
According to some in the sector, this is a case of the government passing on the responsibility for regulating the industry to banks, who have as yet shown no real desire to support smaller operators in the sector.
An anonymous source close to the sector said the FSC needed to intervene immediately to rectify the situation for the good of the wider industry.
“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.”
The new rules also require banks to refuse service to digital currency exchange clients who have failed to uphold compliance requirements, and to report any activities deemed suspicious to the authorities, effectively giving them the role of frontline enforcement for the new regulations.
As many as 20 digital currency firms in South Korea are already reported to have met with the authorities to express their concerns about the measures, which come amid a wider tightening of restrictions on digital currency businesses in the country.