For the first time in history, the government of South Korea has officially recognized cryptocurrency exchanges as financial institutions and regulated digital banks.
Local publications in South Korea have reported that the financial authorities of the Asian country have completed their work of classification of cryptographic exchanges, which led to this sector was recognized as "Cryptocurrency Exchange and Brokerage" ("Exchanges and brokerage cryptocurrency" ), which allows digital trading platforms to operate at large capacity with the support of local authorities.
For many years, the South Korean government has considered intervening the digital currencies sector through regulations and policies, mainly to prevent large-scale cyber attacks and security breaches, as was seen in the case of Bithumb and Coinrail. early 2018
However, local financial authorities feared that the regulation of this market would lead the public to believe that the government was legitimizing the sector. As a result, South Korea postponed the regulation of this type of exchange.
But this week, local publications revealed that the government of South Korea has reached a consensus to recognize cryptographic exchanges as regulated financial businesses, creating a new industry dedicated to digital currency trading platforms.
In the short term, the regulatory framework recently created for exchanges can have a negative impact on both trading platforms and investors, since it means that stricter "Know Your Customer" policies (KYC, for short) will be produced. in English), Anti-Money Laundering (AML, for its acronym in English) and customer verification.
It is likely that exchanges such as Bithumb, Coinone and Korbit also have to review their internal management systems and drastically improve security measures to comply with the new policies.
However, in the long term, local analysts have claimed that the government's decision to legitimize the digital currency sector will lead large institutional investors and retailers to enter the cryptographic market, which will allow digital assets to be considered as a class of emerging assets.
The South Korean authorities will also modify existing regulations to facilitate the development of decentralized applications such as Ethereum and EOS.
The regulation of exchanges as financial institutions will provide the Financial Services Commission (FSC) with direct control and authority over the digital currency sector. Therefore, with regard to the protection of investors in particular, it is expected that in South Korea the sector will undergo significant changes in the coming months.