Crypto exchanges in South Korea have just experienced a historical moment as the country’s government finally decided to officially recognize cryptocurrency exchanges as regulated financial institutions. The decision is likely to have a strong impact on the crypto market, but it does come with certain issues for smaller exchanges.
The exchanges are even receiving their official industry, called Cryptocurrency Exchange and Brokerage, meaning that the trading platforms will now have complete support from South Korean authorities.
A change in status
The crypto sector in South Korea has been waiting for years to be properly regulated to stop multiple forms of cybercrime including hacks and money laundering. The country’s government has been researching how to best implement this, but they hesitated out of trepidation that regulation would indicate that the government has a legitimate crypto sector.
Because of this fear, the regulation took years to arrive and postponing this decision led to some major hacks. However, all of that is about to change, for this week, the government is finally recognizing the exchanges as regulated financial businesses.
However, despite the fact that this decision was long overdue, there will be some negative consequences, alongside the positive impact. These will be experienced by investors and exchanges alike, due to the necessity for several policies. These will include AML (Anti-Money Laundering) policy, as well as KYC (Know Your Customer), and customer verification.
Some of the larger exchanges will be required to completely change their management systems and enhance their security systems if they plan to continue their operations.
In the long run, however, many agree that the decision will have a positive impact. Meanwhile, the government is planning to release another set of regulations, this time to aid the creation of dApps.
Good news for smaller exchanges?
As much as the decision will be good for the large exchanges (at least in the long run), smaller businesses will likely be eliminated from the equation. Before this decision, exchanges were seen as nothing more than trading platforms and communication vendors. This was to their benefit since they only needed a $20 license in order to conduct their businesses without interruption. Whether the smaller exchanges will be able to step up and transition towards this required legitimate business model remains to be seen.