Upbit has become the first South Korean crypto exchange to officially apply for an operating license.
The move is a major statement from the crypto world, that all of the exchanges hit by a recent regulatory audit had failed their due diligence checks.
Upbit appears to have renegotiated its (very successful) banking contract with K-Bank, a KT-backed neobank that has seen account registration skyrocket thanks to its Upbit deal.
Under the terms of the nation’s first piece of crypto-specific legislation – which comes into force on September 24 – all exchange clients must have bank accounts verified by real names and social security numbers.
“The Korean government is shocked at how so few Korean exchanges are ready for the license…Technically, none is ready, and of course, the government doesn’t want to shut them all down and create chaos, so creating several leeways.” DooWanNam, co-founder of StableNode and Asia BD at DeFi protocol MakerDAO tweeted.
The government Said that offering such contracts between Banks and exchanges will mean they must absorb all associated money laundering-related risks.
The Financial Services Commission (FSC)’s Vice Chairman was quoted as stating that “one or two” trading platforms appeared ready to submit their applications before the end of August.
But the process does not end here. Upbit will face a tense wait of up to three months as the FSC’s Financial Intelligence Unit (FIU) reviews its documents. This review could take up to three months, the regulator has stated – meaning there is still the very real prospect that large exchanges may have to suspend their services for weeks.
Upbit’s biggest rival, Bithumb, is likely to be next in line to submit its paperwork, an industry source told Cryptonews.com on condition of anonymity. Korbit and Coinone, the remaining members of the “big four” trading platform group, are also hopeful of submitting well ahead of the deadline should their existing banking partners give them the green light.
The FSC and FIU warned exchanges that they must give “at least seven days’ notice before closing,” during which time customers should be allowed to conclude their transactions and membership with the trading platforms.
They also insisted that “support systems” should be maintained after closure so that users can “withdraw money for at least 30 days after the end of transaction support.”
And the regulators also demanded that should users wish to “complain about damages caused during business closures,” a procedure needed to be put in place to assist legal claims.