South Korea has set a new reserve requirement for crypto exchanges, mandating them to have at least $2.3 million in reserves.
Cryptocurrency exchanges in South Korea with bank-issued real-name accounts will have to reserve 30% of their daily average deposits or a minimum of 3 billion won ($2.26 million) starting from September 2023, according to a report by local news outlet News 1.
The directive comes from the “Virtual Asset Real-Name Account Operation Guidelines” published by the Korea Federation of Banks in July. Meanwhile, the reserve requirement is capped at 20 billion ($15 million). The requirement aims to ensure that crypto exchanges can compensate users if a hack or system failure happens.
The reserve standard will take effect in September. Other rules, such as robust know your customer (KYC) and authentication for collection transfers, will be implemented in January 2024.
Major firms like Upbit and Bithumb are gearing towards implementing the operating guidelines, while smaller exchanges operating only coin-coin markets with no real-name accounts may have issues meeting the September deadline due to a drastic decline in their transaction volume.
Some such exchanges have been known to negotiate with local banks to get real-name account issuance in compliance with the revised Specific Information Financial Act in 2021. However, the report noted that such negotiations may not be finalized before the guidelines come into effect.
One local exchange, Hanbitco, which was recently issued a real-name account, may not be able to implement the new reserve requirement, according to an anonymous representative from the virtual currency sector, who told reporters that it may be the “last train” for Hanbitco.