OKEx has decided to shut down its crypto exchange in Korea rather than contend with a new regulatory framework for cryptocurrency service providers that will take effect tomorrow.  

In an announcement, OKEx Korea informed its users that the crypto exchange will be shutting down all operations in the country next month.

OKEx Korea stated that users would be required to withdraw their Korean won and crypto assets by April 7, and further warned that the exchange would not accept any liability for losses to customers who fail to withdraw their holding before this date.  

The South Korean arm of the OKEx global exchange also outlined that withdrawal applications would be accepted on a 24/7 basis until the cut off time of 6 p.m. on April 7, but requests for withdrawals would not be honored unless they exceed the minimum withdrawal fees of 1,000 won.

New AML regulations

OKEx Korea’s sudden announcement to close down its crypto exchange comes just days before the revised Act on Reporting and Use of Specified Financial Transaction Information is due to take effect in South Korea. Under the new regulatory framework, virtual asset service providers (VASPs) will be mandated to undergo compliance audits as well as report the names of their customers.

According to a Nov. 3, 2020 press release from South Korea’s Financial Services Commission (FSC), the revised Act on Reporting and Use of Specified Financial Transaction Information is aimed to help guard against money laundering.

See related article: Why South Korea’s new law against bitcoin and other crypto could damage its DeFi sector

The new legislation states that VASPs will now be answerable to the FSC and are required to file suspicious transaction reports to the Korea Financial Intelligence Unit. Additionally, VASPs will have to set up real-name verification with an approved South Korean bank for all deposits and withdrawals and apply for certification with the Information Security Management System.

The legislation also permits a six-month grace period for cryptocurrency firms and service providers after the law comes into effect.

The move by Korea’s FSC is based upon the recommendations of the Financial Action Task Force (FATF), which were put forward to its 200 member nations to aid the global watchdog’s mission to prevent money laundering.

Low profits, more compliance rules to navigate

According to a report from Coindesk Korea, a spokesperson for OKEx said the new anti-money laundering regulations would make the local currency market too difficult for cryptocurrency firms to navigate. The spokesperson added that OKEx’s decision to close had also been made due to low profits, making the closure of its Korean operations the practical move rather than act to comply with the regulations. 

Binance, the world’s largest crypto exchange, also shuttered its South Korean operations earlier this year — although the company attributed their decision to low trading volumes and declining liquidity. In a recent interview with Forkast.News, Binance CEO Changpeng Zhao (CZ) revealed that Binance was “winding down” its Korean won stablecoin due to its low uptake. CZ explained that local exchanges like Bithumb and Upbit were already too well-established and fiercely preferred by Korean investors.

See related article: Bitcoin is ‘better form of value’ than fiat, says Binance CEO CZ

Meanwhile, Bithumb’s shareholders have continued to push for the sale of its crypto exchange operations as the new legislation looms. As all cryptocurrency exchanges in Korea will be required to register for a permit from the Korea Financial Intelligence Unit to operate — Bithumb’s recent history of major shareholders being sued for embezzlement will make its chances of obtaining such a license unlikely.

Danny Park contributed to this report.