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TrueNorthBit Reports – The Future of Korean Crypto Exchanges After Travel Rule Remains Dark

London, UK, 4th Oct 2021 – 

What is crypto?

A cryptocurrency or crypto coin is a peer-to-peer digital currency. It uses cryptography to secure transactions between one user and another. In order for people outside of the transaction to verify its authenticity, each transaction must be recorded as part of a blockchain – which is basically just an ordered list of all transactions ever completed using that cryptocurrency. Each transaction within the blockchain is called a ‘block’ and contains data such as how much was sent from address A to address B, at what time this happened, and so forth. Once the transaction is completed, the data in each block cannot be altered, which ensures that it’s impossible to recreate coins spent somewhere where they weren’t supposed to go.

How are cryptocurrencies created? 

People can create new units of existing cryptocurrencies or produce their own, just like digging for gold or printing money. The process is usually referred to as “mining” and requires a considerable amount of effort by computers in order to verify transactions. After verifying these transactions, the computers are rewarded with what basically amounts to a predetermined amount of cryptocurrency (or sometimes something else entirely). TrueNorthBit Broker Laura Gibson says that mining has become increasingly difficult over time; today it would take around 500 years on average for one person’s computer to mine one single bitcoin (which was considered ‘easy’ when it could be done in just a few hours).

How do you store cryptocurrencies?

Many people choose to keep the software that allows them to mine cryptocurrencies such as Bitcoin on their computers instead of using online services. Doing this requires a much larger upfront investment for the user, but it also allows them greater control over their coins and which users can access them. Some alternatives allow users who don’t want to go through the hassle of setting up mining pools to use their computer resources and earn coins in exchange via so-called ‘cloud mining’. This is mostly considered a safer alternative than simply leaving your cryptocurrency in an account where someone else has direct access to it. There’s been some controversy over cloud mining scams – however, whether or not they actually exist is still a hotly debated topic.

How do crypto exchanges work?

Crypto exchanges are basically online markets that allow people to buy and sell cryptocurrencies for other virtual or traditional currencies. These include options like Bitcoin, Ethereum, Litecoin, Monero, Dash, IOTA (RaiBlocks), Ripple (XRP) – along with many other less popular digital currencies. People who want to buy cryptocurrencies need a way of transferring funds into these exchanges; this is typically done through the use of credit cards or prepaid debit cards bought at physical stores using cash. Some exchanges also accept payments via wire transfers (and some banks even offer their own dedicated crypto investing platforms).

Struggling Korean Crypto exchanges

Crypto Exchanges have been on the reader of regulatory authorities. Just recently, the Financial Services commission laid out a set of conditions that had to be met for crypto exchanges in order to continue working. 

The Financial Services Commission (FSC) of South Korea released guidelines for cryptocurrency exchanges. According to these guidelines, all crypto trading platforms would be required to complete several new user verification procedures as well as receive approval from the FSC to operate. Additionally, all existing exchanges would have a grace period of two months to meet the compliance standards. Despite this new regulation, it was revealed that some cryptocurrency exchanges in South Korea were not able to comply with these regulations due largely to a lack of access to financial data necessary for verification purposes.

Laura Gibson says that all of these were to make sure that exchanges work in a way that anti-money laundering police become implementable and practical. It has been revealed that despite the danger of shutting down, only 29 out of 66 firms managed to adapt to the regulations. The rest of the firm refused to comply with the global Anti-Money Laundering rules called the “travel rule” which is why these will cease to function. The 29 will officially get a legitimate status within 3 months. After this period, these exchanges will be monitored and supervised by the respective financial regulatory authorities. 

The Travel Rule

The travel rule is basically a form of money laundering prevention. It requires all exchanges to prevent anonymous transactions and report unusual/large transactions to the authorities. The travel rule makes it mandatory for the companies to have their employees register with the authorities, have them supply identification documents, and inform the authority in case of any international travel. It also requires the companies to inform their own customers when they are moving large amounts of money out of the exchange. These measures are to ensure that the company is not used for money laundering.

Ms. Gibson further explained that a small number of crypto exchanges have decided to abide by the new rules because they believe that the Travel rule is a threat to the anonymity of traders which is a key feature of cryptocurrencies and these companies believe that complying with the travel rule will limit that.  

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