South Korea: Bithumb’s latest break in ties casts shadow over recent regulations
Recently introduced crypto-regulations in South Korea have created a host of problems for space businesses. Following many important steps Bithumb has taken to comply with regulatory requirements, South Korea’s leading crypto exchange has now decided to sever ties with overseas exchange platforms.
According to an official ad, the exchange decided to terminate its trademark licensing agreement with Bithumb Global and Bithumb Singapore. These platforms will no longer be allowed to use Bithumb’s name after their contracts expire on July 30. This would have been done to avoid any connection to future money laundering investigations.
Earlier in March, South Korean financial regulators asked foreign exchanges to register with the national anti-money laundering body (AML) if they used the Korean won. The revised law, with six months’ notice, required banks to issue real-name accounts to traders so that human use of those accounts could be verified. This put banks in charge of analyzing the risks associated with crypto exchanges.
This led to smaller exchanges losing banking partners, entities that were now suspended from withdrawing money for trading if they did not follow the revised guidelines. Many banks that did not assess profitability as worth the risk in the event that a money laundering investigation took place retraced their steps from the crypto space soon after.
On a related note, two of the country’s “Big 4” crypto exchanges, including Bithumb and Upbit, along with other smaller exchanges, removed several missing or short-lived altcoins while placing many more on their watch list. It was a controversial move, especially since South Koreans are known to trade far more altcoins than BTC, with the royal coin only accounting for 7% of transactions in May, according to CoinMarketCap.
In addition, it was reported earlier in July, Bithumb will stop accepting registration applications from foreign traders as of August 13. It will also block access for traders based in four other countries who have been added to the money laundering watchlist.
Around the same time, Bithumb also ad that it would prohibit its employees from carrying out transactions on the platform. This was reportedly done to “ensure a transparent operation” by preventing employees from profiting from the exchange and participating in unfair business practices.
What is the idea behind these steps? Well, these measures are fueled by the idea that the country’s four major stock exchanges risk being de-banked if the risk assessment is high. The decision of the banks to maintain or sever their relationship with these exchanges will decide whether they will be allowed to register with the Korean Financial Intelligence Unit or not.
Even if partnerships with domestic commercial banks are made for the exchange, they still run the risk of not being able to obtain a licensed registration if the authorities believe they are not following the revised AML and KYC rules. . This left the country’s stock exchanges in a precarious position, with smaller exchanges likely wiped out and the larger ones having to bend over backwards to woo financial agencies.