Korean banks to score digital coin exchange by reliability of tokens and issuers

South Korean banks responsible for oversight on the digital coin exchanges they serve in place of state authority will evaluate on the reliability of listed tokens, customers behind the trade, and reputation and creditability of the issuers.

According to a guideline drawn up by the Korea Federation of Banks (KFB) on assessing crypto exchange operators secured by Rep. Yoon Doo-hyun of the main opposition People Power Party on Monday, banks are recommended to evaluate digital asset companies mainly on inherent risk, control risk and other fundamental criteria. The evaluation grade and scope, however, differ by banks based on their internal risk management rules.

Since the Korean financial authority does not directly interfere in cryptocurrencies as it does not accept them as “legitimate” assets, it enhanced regulation on banks that serve accounts for crypto trade.

Crypto exchanges operating in Korea can only accept real-name account holders verified by banks by Sept. 25 when toughened financial law on digital assets takes effect.

The bank federation scurried to devise a set of rules on their own as the state does not have one.

For digital asset firms’ inherent business risks, banks evaluate risks can grow when crypto exchanges handle greater volume of digital assets, especially low-credit crypto currencies. Among the digital coins, bitcoin is rated the top AA+ and Etherium second highest AA.

Local crypto exchanges reportedly are sorting out digital coins for delisting based on the KFB’s credit rating chart.

Earlier on June 18, Korea’s largest crypto exchange Upbit removed 24 coins from its marketplace. The No. 2 Bithumb a day earlier announced to kick out four coins. Probit, among Korea’s top 5 crypto markets based on transaction amount, delisted a bulk of 145 coins from the Korean currency-based trading market as of June 1.

Banks also would find crypto exchanges with wider offering of digital asset based services, such as remittance and deposit, riskier.

The greater the number of high-risk traders, the poorer crypto exchanges can score.

The KFB’s checklist classified investors’ nationality into four groups by risk taking tendency. Retail investors’ profession is also reviewed and grouped into four, labeling those engaged in loan services and gambling businesses the riskiest.

Qualitative reviews are made as well. Crypto exchanges are reviewed for reputation, business structure, and history of violating financial rules on top of other adverse records.

Yoon of PPP urged banks to share their set of guideline for transparency and alertness to investors.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]