Coinpia, a South Korean exchange, has announced its decision to suspend depositing and trading at its exchange after it was unable to implement a KYC system as required by law. The government provided a tight deadline and expected all exchanges to be compliant by January 30th. However, for various reasons, this exchange could not do so.
Details of its Decision
According to the announcement that it made on Tuesday on its homepage, the exchange suspended deposits of South Korean won on January 30. This was in a bid to ensure that it was compliant with the regulations issued by the Finance Services Commission of South Korea.
The notice on its site stated that, for now, it would not allow the transactions of Litecoin and Bitcoin. Investors would not be able to purchase any more coins, but they could still cash out whenever they wished. The statement further added that the exchange had been actively seeking a partner bank, but had failed to secure a contract with any of them. However, it did not indicate whether it would soon resume trading.
Details of the Government Regulations
Since January 30th, the new government regulations have required banks to issue digital currency accounts to customers. That means exchanges will no longer be allowed to provide accounts to clients via their corporate accounts. This process was unregulated, and no verification took place. Thus, exchanges had no way of knowing who was a fake and who was real. Thus, their KYC policies were very weak.
Since the end of last month, everyone who owns a digital currency account has to verify his or her identity. This is achieved when an exchange collaborates with a bank. The bank is then tasked with the job of issuing these accounts. Some of the exchanges that have already done this include Bithumb, Korbit, and Coinone.
However, some banks are not so enthusiastic about this move. Some are not so willing to work with the digital exchanges. This is because they view the government as having a poor attitude towards them. For instance, the government recently threatened a complete ban on cryptocoin trading in South Korea.
The Future of Coinpia
For now, Coinpia will stop operations until it can find a willing partner. Otherwise, it would have to continue operating while in breach of anti-money laundering laws. This in effect makes Coinpia the first exchange suspended for not following the new rules.
In the past, the exchange has been in trouble with the law. It was one of the eight exchanges fined $131,000 by Korea’s Communication Commission for failing to have sufficient user protection measures in place.
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