OKEx cryptocurrency exchange has said it will terminate its South Korea-based business, following the introduction of an updated Anti-Money-laundering (AML) in the country.
The exchange’s spokesperson said OKEX chose to resign rather than try to fight the tough regulatory regime which would make it impossible to continue operating in South Korea.
“OKEx Korea service has ended on April 7th. We would like to thank all of our customers who have used OKEX Korea in the meantime.”
According to the spokesman, the new AML law which comes into effect on March 25 will make it hard for crypto-businesses to navigate the local cryptocurrency market.
“In addition to several other factors, actual profits from our Korean operation don’t add up to much, so we decided to cut our losses.”
OKEx has notified its South Korean clients that they should have withdrawn their crypto and fiat funds by latest April 7.
“Please be sure to withdraw the KRW and cryptocurrency by 7 (wed), the service end date.”
South Korea’s Regulatory Atmosphere is Becoming Crypto-Hostile
South Korea’s financial markets regulator (FSC) enforces the Financial Action Task Force (FATF) guidelines or standards on virtual assets and Virtual Assets Services Providers (VASPs).
The FSC announced in January 2021 its plan to revise its AML law, titled, ‘Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information‘ which would see crypto exchanges regulated under the country’s Special Act.
The new amendment requires crypto businesses to register with the Financial Intelligence Unit (KoFIU), giving existing businesses six months to comply with the new changes, once the law starts to implement. There are also strict guidelines on implementing systems for strict KYC adherence, Information Security Management System (ISMS), and AML screening.
VASPs are required to comply with customer identity verification procedures as well as flagging down accounts with suspicious activities. The Financial Services Commission said:
“The authorities will carry out inspection and supervision on VASPs with regard to their compliance of AML requirements from the time of business registration.”
FSC to Implement New Penalty Rules for Crypto Firms
OKEx’s announcement comes a day after the government approved the law on March 22. After the approval, OKEX said that it would temporarily end deposit and trading services for the Korean Won (KRW), to systematically prepare for the new obligations outlined in the amendment.
Earlier in the month, the FSC said that it would penalize crypto firms for not adhering to the new regulation with fines ranging from $26,000 to $100,000, based on the size of the startup as well as its level of breach.
“The revision proposal introduces new penalty standards on VASPs, simplifies and integrates existing penalty rules, and improves rules on penalty abatement to provide relief for small scale financial enterprises.”