In the South Korean crypto world, when it rains, it pours. Fresh from a regulatory crackdown that has led to mass crypto exchange shutdowns, the handful of still-functioning trading platforms are now facing up to fresh know-your-customer (KYC) protocol-related heartache.
Per the Chosun Ilbo, a spate of new regulatory requirements that came into force last week is slowing down business at the nation’s biggest crypto exchange.
Recently promulgated amendments 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, it is taking customers “seven days” in best-case scenarios or “three months at most” to clear KYC hurdles.
And the issue appears to be on the government’s end, with Upbit forced to go through sluggish government administrative computer network systems in order to register the required paperwork and photos of documentation such as driver’s licenses.
“The problem is caused by the fact that the authentication process using the government administrative computer network is complicated and takes a long time.”
Upbit, along 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 have been dismayed to learn that the platform is incapable of handling more than a few cases at a time. Upbit has some 8.3m customers, all of which must now pass through the system – hence the possible three-month backlog.
During the hold-up, the media outlet continued, customers who are still waiting for the KYC green light “will not be able to transact at all.”
In a worst-case scenario, “millions of customers simultaneously request authentication” could lead to a “total transaction suspension due to a server failure,” Chosun remarked.
Regulators have responded by admitting they could grant exchange users a “one-week” grace period on KYC registration, but only on transactions worth less than USD 845.
An Upbit official was quoted as stating:
“If the financial regulators demand that KYC be applied in bulk without a grace period, it seems that there will be a lot of 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 personnel” it has on standby to “prepare for a surge in complaints” from those affected.