South Korean regulatory authorities have ordered that crypto exchanges hold a minimum reserve of 3 billion won ($2.3 million) in bank accounts starting in September to protect consumers. Upbit and Bithumb, two major South Korean cryptocurrency exchanges, are on pace to satisfy the July Korea Federation of Banks criteria.

South Korean Lawmakers Tighten Hold on Crypto Exchanges

The Korea Federation of Banks’ Virtual Asset Real-Name Account Operation Guidelines require cryptocurrency exchanges to set aside at least 3 billion won, or 30% of their daily average deposits, to cover user damages in the event of unforeseen events. These reserves are limited to 20 billion won.

In June, South Korean lawmakers passed cryptocurrency investor protection rules that gave the Financial Services Commission (FSC) and Bank of Korea oversight over cryptocurrency operators and asset custodians. These techniques also allow regulators to punish abusive virtual asset trading.

Last month, the FSC announced that domestic enterprises must record their crypto holdings under new accounting standards. It will start next year to increase openness and accountability. These rules also require crypto issuers to disclose their tokens, business strategy, and internal accounting methods.

Trending Now: Binance Lowers Minimum Order Sizes to Attract Diverse Traders

Most real-name exchanges appear to comply as the reserve requirement deadline approaches in September. Coin-only exchanges may struggle to achieve these strict rules.

Banking Industry to Strict Customer Verification in 2024

Industry insiders said virtual asset exchanges with real-name accounts must reserve 3–20 billion won by September. This reserve compensates for unexpected events like cyberattacks and technical failures.

Virtual asset exchanges must reserve 30% of their daily average deposits or 3 billion won under the new banking regulation. This implies protecting 30% of daily deposits over 3 billion won for major exchanges like Upbit, with a reserve maximum of 20 billion won if crossed.

In January 2024, the banking industry will impose stronger customer verification procedures in addition to the reserve requirement. However, the reserve need was accelerated to September to safeguard users faster.

The FSC Financial Intelligence Unit (FIU) produced real-name account requirements based on the Korea Federation of Banks operating norms. Financial regulators have recommended a transparent reserve size condition for real-name accounts in response to exchanges without them.