For the first time in history, the government of South Korea has officially recognized crypto exchanges regulated financial institutions and banks.
Local publications in South Korea have reported that the financial authorities of South Korea have finalized their plans to categorize crypto exchanges as an industry called “Cryptocurrency Exchange and Brokerage” to enable trading platforms to perform at a large capacity with support from local authorities.
From Communication Vendors to Financial Institutions
For many years, the government of South Korea has considered regulating the cryptocurrency sector with practical regulations and policies, primarily to prevent large-scale hacking attacks and security breaches from occurring, as seen in the case of Bithumb and Coinrail in early 2018.
However, local financial authorities feared that the regulating the cryptocurrency market would lead the public to believe that the government has legitimated the cryptocurrency sector. Consequently, South Korea postponed the regulation of cryptocurrency exchanges.
This week, local publications revealed that the government of South Korea has come to a consensus to recognize crypto exchanges as regulated financial businesses, creating a new industry dedicated to cryptocurrency trading platforms.
In the short-term, the newly created regulatory framework for cryptocurrency exchanges may have a negative impact on both the trading platforms and investors, because it would mean stricter Know Your Customer (KYC), Anti-Money Laundering (AML), and customer verification policies.Crypto exchanges like Bithumb, Coinone, and Korbit will also be likely required to overhaul their internal management systems and drastically enhance security measures to remain in compliance with new policies.
Still, in the long run, local analysts have stated that the decision of the government to legitimize the cryptocurrency sector will lead to large-scale institutional investors and retail traders entering the crypto market, allowing digital assets to be considered as an emerging asset class.