South Korea‘s cryptocurrency exchanges said Friday they will adopt self-regulatory measures to boost transparency in the highly speculative market.
The Korea Blockchain Association, consisting of 14 virtual currency exchanges here, announced plans to raise the market entry barrier for operators as part of ongoing efforts to protect investors in the fluctuating market.
Kim Jin-wha, co-founder of the KBA’s preparatory committee (Yonhap)
Starting in January, the exchanges will bear responsibility to force traders to store at least 70 percent of cryptocurrency in “cold wallets” -- meaning off the internet -- according to the association‘s preparatory committee.
Moreover, exchanges with over 2 billion won ($1.83 million) in assets are entitled to join the association as a member, up fourfold from the 500 million won suggested in a revision proposal by ruling Democratic Party of Korea Rep. Park Yong-jin in August.
Firms will also be required to build customer service centers both online and offline and verify identification of an account holder when he or she creates a new account, at a maximum of one per person on each exchange.
Any breach of self-regulatory guidelines, or irregularities such as insider trading, will be subject to disciplinary actions by an independent committee made up of seven board members, including one representing the cryptocurrency exchange industry.
Compliance will also be made through the association‘s cooperation with banks -- Nonghyup Bank, KB Kookmin Bank, Industrial Bank of Korea, KEB Hana Bank, Shinhan Bank and Gwangju Bank -- that will start providing virtual accounts for member cryptocurrency exchanges of the KBA from January. The banks may not provide users of nonmember cryptocurrency exchanges with virtual accounts.
The committee is currently made of scores of blockchain business entities including 16 cryptocurrency exchanges, 20 tech companies and four state-run firms.
Prior to the announcement, cryptocurrency exchange operators at the venue had come up with measures to curb speculations.
Coinone CEO Kevin Cha (center). (Yonhap)
Member exchanges will temporarily halt marketing for cryptocurrencies and the launch of new coin trades, while putting additional efforts in enhancing security systems, in part by disclosing the ratio of investment for security to operation and marketing costs, Kevin Cha, chief executive of Korea’s second-largest exchange Coinone, told press on behalf of 14 cryptocurrency exchanges, including nonmembers of KBA.
This came two days after the government unveiled plans Wednesday to tame cryptocurrency price volatility by obliging exchanges to verify the real names of virtual accounts, levy tax on the trades and bar minors and foreigners from buying encrypted coins, though stopping short of shutting down the exchanges.
In line with the move, commercial banks, including Shinhan Bank, have announced they would halt the supply of virtual accounts for exchanges.
Top financial watchdog the Financial Services Commission, meanwhile, said Thursday a bill to label cryptocurrency exchanges as illegal fundraisers is being drafted, separate from the Wednesday pangovernmental measures.
Kim Jin-hwa, co-founder of the preparatory committee of KBA and former co-founder of Korbit, argued the cryptocurrency exchanges cannot be viewed as illegal fundraisers.
“Cryptocurrency exchanges do not promise customers high returns, and instead highlight the danger of speculations,” Kim said. “The government appears to be retroactive against the wave of the ‘fourth industrial revolution.’”
A committee, led by co-founders Kim Jin-hwa and Kim Hwa-joon, has prepared the launch of KBA since June.
By Son Ji-hyoung (email@example.com