South Korean cryptocurrency exchange will imitate Coinone to verify private wallets

The National Exchange will require users to verify their third-party wallet addresses to help the country comply with FATF travel rules guidelines.

Industry analysts said that major cryptocurrency exchanges in South Korea, including Upbit, Bithumb, and Korbit, will follow Coinone's example and ban transfers to unverified wallets.

Coinone announced yesterday that from January 24, it will reject deposits from unverified private wallets to reduce the risk of money laundering. All South Korean exchanges, including Upbit, Bithumb, Korbit and 20 other exchanges, are expected to implement similar or identical measures to Coinone on or before March 25. The South Korean government has set a period for exchanges to accurately track transactions on and off the platform.

South Korean blockchain industry analyst Jun Hyuk Ahn told Cointelegraph, “The Korean exchange is creating its own travel rules solution to meet the requirements for operations after March.”

"All South Korean exchanges will have to use some travel rules system by March because the government has set deadlines for them. Coinone is just the first to do so."

The exchange rules will also help the Far East country to comply with the "travel rules" of the Financial Action Task Force (FATF).

According to anti-money laundering compliance service Sygna, travel rules stipulate that governments must "ensure that domestic exchanges and counterparties share true identity information, otherwise they will face more anti-money laundering/anti-terrorist financing supervision."

These compliance regulations for exchanges are part of a series of regulatory restrictions on cryptocurrency exchanges. These restrictions start with requiring all users to use real-name bank accounts. Before the rule is implemented in 2018, cryptocurrency exchange accounts can be linked to bank accounts owned by multiple individuals.

By September 2021, the exchange is required to conduct Internet Security Management System (ISMS) verification and a domestic bank partner that issues real-name accounts. All exchanges that did not meet the requirements were forced to cancel the Korean won trading pair or suspend their services.

The country has also been working hard to resolve global FATF compliance issues related to non-fungible tokens (NFT). Financial regulators have been vacillating on the direction of NFT policies until the South Korean Financial Services Commission stated in its latest statement on November 24 that it will explore plans to supervise and levy taxes on NFTs.

On a global scale, the Korean Exchange is an outsider in compliance with this rule. So far, no other large crypto spot exchanges require users to verify their private wallets.