South Korean crypto-related firms said they are concerned that their financial regulators are giving banks too much power.
In the latest regulatory rulings unveiled this week, regulators stated that banks would be obliged to decide whether they want to do business with crypto exchanges using their anti-money-laundering (AML) risk assessment processes.
The move will mean banks have the final say on which exchanges ultimately receive regulatory permission to operate – as unbanked exchanges will be unable to obtain operating permits under the new law.
But the latest ruling has angered much of the nation’s crypto community.
Blockchain consultant Mira Kim told Cryptonews.com,
“There are a lot of angry people in the South Korean crypto sector right now. A lot of crypto exchanges feel that they’re essentially surrendering their fates to the whim of big banks. And those big banks are also getting their own way with crypto custody, too. It seems really unfair for a lot of exchanges to allow banks to just tell them arbitrarily, ‘Sorry, we don’t think you are worth taking a risk on.’”
According to Seoul Finance, an official at an unnamed domestic crypto exchange warned,
“If the banks refuse to do business with exchanges, they will be forced to close down.”
The fresh set of rules that will take effect in 2021 also emerges to enable banks to make their policies without explaining their applicant exchange choices.
Both Kim and the specialists interviewed by Seoul Finance considered that while more notable exchanges that already follow by the strictest of bank-issued AML policies will likely be safe, small and medium-sized platforms are most at risk from the new standards.
The same media outlet cited an unnamed executive at a domestic, commercial bank as admitting,
“As the banking sector is naturally conservative about working with new businesses, internally, we have no choice but to look more carefully at the potential risks of dealing with new clients than the potential benefits for the bank.”