In the South Korean crypto world, when it rains, it rains. Costs regulatory repression which has led to massive crypto exchange shutdowns, the handful of still functioning trading platforms are now facing a new heartache over the Know Your Client (KYC) protocol.
Through The Chosun Ilbo, a series of new regulatory requirements that took effect last week is slowing the activities of the country’s largest crypto exchange.
Recently enacted changes to the Use of Specific Financial Information Act mean that only existing customers who have completed KYC authentication steps, including identity verification, can continue trading. But in the case of the market leader Upbit exchange, it takes customers “seven days” at best or “three months at most” to overcome the KYC hurdles.
And the problem appears to be on the government side, with Upbit being forced to go through slow government administrative computer network systems in order to register required documents and photos of documents such as driver’s licenses.
“The problem is caused by the fact that the authentication process using the government’s administrative computer network is complicated and time consuming. “
Upbit, with its biggest rivals Coinone, Korbit, and Bithumb, is obliged to upload the relevant KYC data to a platform operated by the Ministry of Public Administration and Security. But exchanges were dismayed to learn that the platform is unable to handle more than a few cases at a time. Upbit has some 8.3 million customers, all of whom now have to go through the system, hence the possible three-month delay.
During the hold-up, the media continued, customers who are still waiting for the KYC green light “will not be able to transact at all.”
In the worst case, “millions of clients simultaneously request authentication” could result in a “total suspension of the transaction due to a server failure,” Chosun noted.
Regulators responded by admitting that they could give exchange users a “one week” grace period for KYC registration, but only for transactions valued at less than $ 845.
An Upbit official said:
“If financial regulators demand that KYC be enforced en masse without a grace period, it looks like there will be a lot of clients who will be restricted in their transactions because they have not yet received authentication clearances.”
Upbit responded to the challenge by “preparing to double the number of employees” it has on hold to “prepare for an increase in complaints” from those affected.
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