Binance required to register its business to FSC before Sept. 24
By Anna J. Park
After the country’s top financial regulators confirmed plans to strengthen regulations on cryptocurrencies to rein in the ongoing crypto-craze, Binance, the world’s largest coin exchange in terms of trading volume, is facing mounting obstacles here.
The authorities are set to ban overseas-based cryptocurrency exchanges’ operations in the country unless they register their businesses with the government by Sept. 24.
According to a revision of the Act on Reporting and Using Specified Financial Transaction Information, local cryptocurrency exchanges must register their businesses by that date in order to obtain a government license. The Financial Services Commission (FSC), in charge of supervising and overseeing the cryptocurrency sector, is planning to impose the same rule for overseas coin exchanges ― including Binance.
In order to register their business, the exchanges are required to be certified by the Information Security Management System, and to make sure their existing customers have real-name back accounts for cryptocurrency transactions. Plus, their chief executives and board members must have no criminal record. The revision also stipulates that exchanges must clarify that they have the proper levels of deposit insurance to cover any potential losses due to cyberattacks.
If overseas exchanges fail to fulfill this set of criteria by September 24, they will be banned from doing business in Korea from Sept. 25. Given that Binance provides services in Korean, the FSC’s Financial Intelligence Unit (FIU) considers it to be operating a business here, although the specifics of its business model need to be legally examined.
“Even if the exchanges are headquartered overseas, if they conduct business operations to target Korean users, they are obliged to report this to the FIU,” an official of the unit said.
It’s unknown whether these moves are aimed at checking and targeting possible money-laundering and other financial crimes by Binance customers, or are in response to complaints that the registration measure could be seen as reverse discrimination, if the FSC only focuses on local cryptocurrency exchanges, while ignoring global firms.
Binance has been the primary target of regulators in Japan, Canada and the U.K. In Japan, it was asked to provide licensing information, while its business in Ontario, Canada, was halted June 26. Additionally, the U.K. financial authority issued a warning to Binance to not offer business activities that it hadn’t approved.
Because Korea is home to 10 percent of global cryptocurrency transactions by volume and major cryptocurrencies are traded at a premium here, the FSC is cooperating with its overseas counterparts to improve the regulation of crypto-assets in a way to make the trading system more transparent, and safer for traders.
“If Binance fails to meet the criteria in the Act on Reporting and Using Specified Financial Transaction Information by September of this year, then the financial authorities should take action to shut it down,” said Noh Woong-rae, a lawmaker of the ruling Democratic Party of Korea.
Founded in 2017 by CEO Changpeng Zhao, Binance was initially based in China, until its headquarters were relocated to the Cayman Islands. Binance has some customer services and corporate organizations registered in Malta, while its investment arm is registered in the Seychelles. Binance established its Korean branch in early 2020, but it stopped operating earlier this year.
Currently, Binance does not run any official business corporation established in Korea. However, the fact that the global coin exchange provides Korean language services on its trading platform can be interpreted as it still operating in Korea.