South Korean Gopax faces closure on failure to find banking partner owing to new licensing mandate
With the license application deadline only a week away on September 24, Gopax, backed by Digital Currency Group in South Korea, faces potential closure.
The cryptocurrency exchange hasn’t been able to meet sufficient standard processes for licensing, therefore, falling victim to the country’s fast-paced government deadline for crypto businesses to submit requests for a formal operating license.
In order to obtain the operation license, all crypto firms must prove through documentary evidence that they are functioning using real-name accounts at banks in South Korea. The catch lies here that domestic banks have largely refused to engage in any kind of risk assessment procedure for the small and medium-sized exchanges running in the country. Korean banks are only confident of serving their Big Four trading platforms, namely Bithumb, Upbit, Coinone and Korbit.
On September 17, the Gopax team informed its customers that the exchange was
“currently negotiating” with relevant financial institutions for establishing a real-name deposit and withdrawal account that is subject to verification,” as mandated by the Korean government’s new regulatory regime.
Gopax would be allowed to operate normally until September 24 with its Korean won crypto trading. Still, if the negotiations fail to resolve the issue, the exchange firm has informed its users that it would be compelled to “end support for won transactions”, including deposits and withdrawals.
Gopax has already halted its services for non-Korean customers, who are now prohibited from using South Korean exchanges under the new guidelines.
Gopax currently ranks first in the country where factors like regulatory metrics, legal concerns, investment calibre, quality of data provision, and trade surveillance are accounted for. The ranking has been given by CryptoCompare.
The operating company of Gopax, Streami, had received funding from one of South Korea’s largest commercial banks, Shinhan.
According to crypto analysts in the country, about 40 of the total 60 crypto exchanges in South Korea would be forced to shut down due to the updated licensing rules.
The country’s Financial Services Commission, which is responsible for overseeing the new regulatory framework, has justified the action saying that traders have demanded more protection for their digital assets held at smaller and medium-sized crypto exchanges.