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In the South Korean crypto world, it pours when it rains. Fresh from a regulatory crackdown that has led to mass crypto exchange shutdowns, the handful of still-functioning trading platforms are now facing new Know-your-customer (KYC) protocol-related grief.
According to Chosun Ilbo, a flood of new regulatory requirements that came into force last week is slowing business on the country’s largest crypto exchange.
Recently released changes to the Specific Financial Information Usage Act mean that only existing customers who have completed KYC authentication steps, including ID verification, can continue to trade. But in the case of the market-leading Upbit exchange, at best, customers need “seven days” or “three months at most” to overcome KYC hurdles.
And the problem seems to be at the end of the government, with Upbit forced to go through sluggish computer network systems of the government to register the necessary documents and photos of documents such as driver’s licenses.
“The problem is caused by the fact that the authentication process through the government computer network is complicated and takes a long time.”
Upbit, along with its biggest rivals Coinone, Korbit and Bithumb, is required to upload the relevant KYC data to a platform operated by the Ministry of Public Administration and Security. However, the exchange was dismayed to learn that the platform is not able to handle more than a few cases at once. Upbit has around 8.3 Million customers who now all have to go through the system – hence the possible three-month backlog.
During the hold-up, the media company continued, customers who are still waiting for the KYC green light “will not be able to transact at all.”
In the worst case scenario”MILLIONS of customers requesting authentication at the same time” could result in a “complete transaction lockout due to a server outage,” Chosun noted.
Regulators have responded by admitting that they could grant exchange users a “one-week” grace period for KYC registration, but only for transactions worth less than USD 845.
An Upbit official was quoted as saying:
“When financial regulators demand that KYC be applied in large quantities without a grace period, it seems that there will be many customers who will be restricted in their transactions because they have not yet received authentication permissions.”
Upbit has responded to the challenge by preparing to double the number of employees on standby to prepare for an increase in complaints from those affected.