The Financial Services Commission (FSC) has determined that, based on its consultations with the heads of various domestic cryptocurrency exchanges, most exchanges do not qualify for registration under the FSC’s Financial Intelligence Unit (FIU).
The Financial Transactions Reports Act (FTRA) requires all domestic cryptocurrency exchanges to register with the FIU by Sept. 24.
To qualify for registration, exchanges must secure partnerships with domestic commercial banks. They also need to demonstrate the robustness of their anti-money laundering (AML) systems, know-your-customer (KYC) protocols, and anti-hacking security.
Since June 15, the FSC has dispatched teams of consultants to 25 exchanges to advise them on the FIU registration process and to evaluate their level of preparedness.
On Aug. 16, the FSC sent out a press release saying, "Not a single exchange that we consulted with meets all the conditions of FIU registration, and the overall level of preparedness of most exchanges is unsatisfactory.”
The FSC added that an inspection of exchanges' AML systems revealed that they were largely insufficient for identifying and flagging suspicious transactions, and that exchanges don't have enough staff devoted to security protocols.
Among the 25 exchanges the FSC consulted with, 19 have had their information security management systems (ISMS) certified by the Korea Internet and Security Agency (KISA) -- a prerequisite for registration. Among these 19, only four currently have bank partnerships.
But all of these four bank contracts expire on Sept. 24. Banks are currently reviewing their partnerships with crypto exchanges, and no bank has announced an extension beyond Sept. 24.
In the press release, the FSC indicated that its consultants had "conveyed to exchanges what they need to improve" as the registration deadline approaches.
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