If you use Binance in Korea — or some other overseas exchanges — you might want to begin pondering alternatives.
The head of the Financial Supervisory Service’s anti-money laundering team told CoinDesk Korea yesterday that from March 25 — when the so-called “travel rule” becomes mandatory — traders should make their transactions using platforms that implement the travel rule.
Though Binance is the world’s biggest cryptocurrency exchange, it’s not registered as a “virtual asset service provider” (VASP) anywhere, nor is it ever likely to be as this would subject them to the regulatory regimes of individual states — something they’d like to avoid, according to CoinDesk Korea.
Recommended by the international Financial Action Task Force in 2019 and subsequently written into Korean law, the travel rule requires exchanges to collect sender and recipient information during cryptocurrency transactions above a certain threshold.
The conventional finance space — not to mention regulators — regard the rule as part of the natural order of things.
With the virtual asset space, however, the rule is controversial for both philosophical reasons (it could go against the spirit of cryptocurrency by rendering anonymous or pseudo-anonymous transactions impossible) and purely practical ones, namely, it might be technologically impossible.
In Korea, cryptocurrency exchanges have struggled to comply with the rule, though three of Korea’s four big exchanges will implement a joint solution from this month, while the fourth — UpBit — will implement an independently developed solution sometime later.
Even Binance has recognized the urgency of the problem, implementing a solution after Japan, the United Kingdom and the Canadian province of Ontario banned its operations.
Still, last month, CoinDesk Korea reported that local exchanges would likely ban coin exchanges between them and overseas exchanges — and Binance in particular. This would render arbitrage trading impossible, making life difficult for those trying to take advantage of the so-called “kimchi premium.”
The Iconist’s Note: Seems that overseas exchanges that are not registered with Korea’s financial authorities could face significant limitations in Korea, regardless of whether they implement the travel rule or not. But we’ll just have to wait and see how things shake out.
