With several cryptocurrency exchanges in South Korea on the verge of collapse as a new regulatory framework takes effect, some are threatening to sue the Korean government for alleged neglecting of crucial obligations.
With the introduction of new laws from South Korea's Financial Services Commission (FSC), several smaller Bitcoin exchanges in the nation fear closure.
These laws require each exchange to demonstrate that it has a real-name account at a Korean bank by September 24, 2021, with the caveat that local banks, except for the country's top four trading platforms, are not doing any risk assessments for applicant exchanges.
Domestic banks are obligated by the FSC's new guidelines to refuse services to any crypto exchange client who fails to comply with ID verification requirements or fails to report suspicious activity.
According to one industry source, the government and banking authorities have basically delegated most of the duty for crypto exchange screening to banks, which are now “forced to assume responsibility for providing real-name accounts.”
Given that the Korea Federation of Banks and other commercial lenders have already petitioned the FSC to alter the new laws, fearing their potential liability for financial crimes committed on crypto exchanges, the government may soon under pressure from all sides.
According to Business Korea, an unspecified number of exchanges are considering launching a constitutional petition against the government and financial authorities for their apparent failure to regulate the business and ensure the best standards.
The Financial Services Commission is an independent regulatory body. According to reports, the FSC is refusing to work with Korean cryptocurrency exchanges.
According to others, banks are hesitant to take on the task of verifying smaller, lesser-known sites. If they fail to satisfy the criteria, the FSC said it will intervene "immediately."