South Korea requires crypto exchanges to set aside at least $2.3 million in reserves for customer protection
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- Korea Federation of Banks requires crypto exchanges in South Korea to hold minimum reserves of 3 billion won, local media reports.
- Upbit and Bithumb are on track to comply with the requirement outlined in guidelines titled Virtual Asset Real-Name Account Operation Guidelines.
- The reserves will be used to fulfill the liability of damage to the exchange’s users.
The Korea Federation of Banks is a bankers’ association, similar to the American Bankers Association. Its members are banks and financial institutions and it sets guidelines in lieu of protecting customer funds.
The association recently issued guidelines for crypto exchanges, requiring a sum of 3 billion won or 30% of the average daily deposits to be set aside as reserves. This reserves would be used to make customers whole in the event of an event that results in a loss of funds for users.
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South Korean crypto exchanges required to maintain $2.3 million in reserves
South Korea has ramped up efforts to protect crypto traders from loss of funds at the behest of crypto exchanges. In its latest effort, the Korea Federation of Banks issued guidelines titled “Virtual Asset Real-Name Account Operation Guidelines,” according to reports by a local news agency News1.
The guidelines require crypto exchanges operational in South Korea, like Upbit and Bithumb, to set aside reserves of $2.3 million (3 billion won) or higher, capped at $20 billion won. The actual value of reserves to be maintained is a minimum of $2.3 million or 30% of the exchange’s daily average deposits by users, starting September.
According to the Federation, the funds from these reserves will come in handy when the exchange owes “damages” to users or has a liability for damage.
After the collapse of exchanges like Samuel Bankman Fried’s FTX in November 2022, South Korean institutions and regulators have turned their attention to the protection of customer funds while setting guidelines for crypto exchanges operating in Korea.
The move is likely to instill confidence in users and drive adoption of crypto trading across exchange platforms.
