Compliance with the laws puts South Korea ahead of the curve in terms of virtual asset regulation, but it may be damaging the domestic industry by imposing excessive transfer restrictions between crypto exchanges.
South Korean crypto exchanges have met the government’s deadline to comply with the so-called Travel Rule, but not everyone in the business is delighted with the legislation.
Starting today, any crypto transfers worth more than $821 will be flagged by Korean exchanges. User-verified wallets and a small number of exchanges that have accepted their anti-money laundering system will be able to send money over that amount.
The Travel Rule is a series of rules released by the Financial Action Task Force (FATF), an international financial watchdog, to assist authorities in tracking the movement of virtual assets between virtual asset service providers (VASPs), such as crypto exchanges and digital asset issuers.
The regulatory action, according to a source from a local centralized exchange, is a step forward for the country’s crypto business, as follows:
Traders in South Korea, which amassed $45.8 billion in crypto market value in 2021, may have difficulty determining which crypto exchanges they can transfer assets to and from. There are two Travel Rule systems among the top four exchanges (Upbit, Bithumb, Coinone, and Korbit). Each system works in a slightly different way, and foreign exchanges must adhere to its rules. Transfers will not be permitted if those requirements are not fulfilled.
These disparities, according to Simon Kim, CEO of South Korean crypto VC Hashed, are likely to produce confusion and frustration among domestic traders. He believes the mandate is “obviously over-regulation” in the Korean crypto ecosystem, as he explained:
The blockchain ecosystems Klaytn and Ethereum, the NFT game Axie Infinity, and the decentralized exchange dYdX are all part of the Hashed crypto and Web3 portfolio.
According to local expert Jun Hyuk Ahn, Upbit is the country’s largest crypto exchanges, with approximately 78.3 percent of the exchange market share. It has implemented its own Verify VASP program. Upbit currently supports transfers to and from Bblock, Gopax, Cashierest, Flat Thai Exchange, Aphrobit, Binance, Bybit, Okcoin, Crypto.com, Coinbase, BITFRONT, Bittrex, Bitbank.cc, Gate.io, Kraken, BitMEX, FTX US, and HARU Invest affiliates in Singapore, Indonesia, and Thailand.
Meanwhile, the CODE method has been implemented by Bithumb, Korbit, and Coinone. Coinbase, Kraken, Coincheck, bitFlyer, Bybit, Gemini, Coinlist Pro, Phemex, Bitbank, Line bitmap, Bitfront, FTX, and Binance are all supported.
Domestic transfers are halted till the 8th of April.
Decentralized finance (DeFi) traders, who rely on personal wallets to make deals, maybe the hardest hurt by the rules. No transfers to or from private wallets will be allowed on any exchange unless the user validates the address in person.