South Korea’s largest cryptocurrency exchange, Bithumb has announced in a press release dated May 27, 2018, that it will restrict the accounts of users from 11 “high-risk jurisdictions” preventing them from taking part in digital asset trading as from June 21, 2018.
The decision, which comes at a time when Bithumb is already dealing with the fallout from an existing internal scandal is expected to relieve the pressure associated with the risk of facilitating money laundering. The 11 countries on the restricted list are Iran, Serbia, Sri Lanka, Tunisia, Ethiopia, North Korea, Iraq, Trinidad and Tobago, Vanuatu, Yemen, and Syria.
Prevention of Money Laundering and Funding of Criminal Enterprise
Under the Non-Cooperative Countries and Territories (NCCT) Initiative, such territory is defined as a country where efforts to prevent money laundering, terror funding, and criminal financing have been deemed insufficient in the assessment of the Financial Action Task Force.
South Korea is one of the world’s biggest cryptocurrency trading markets, and Bithumb ranks first in the country and fifth in the world by trading volume, which makes the exchange a potential facilitator of money laundering and a target of interest for Anti-Money Laundering (AML) regulations.
With the imposition of the ban on these 11 territories by Bithumb, there is a significant likelihood of a global ripple effect as other exchanges around the world scramble to take similar actions and avoid being implicated by a raft of new laws and regulations coming into force around the world to regulate the digital assets trading market. The purpose of the worldwide push to regulate crypto exchanges is to prevent dirty money from being laundered through digital assets and to prevent the use of cryptocurrencies as a means of circumventing conventional banking regulations regarding funding of terrorism and organized crime.
Effects And Outcomes
Under the new dispensation, Bithumb will no longer accept the registration of new accounts from users in any of the 11 designated NCCT countries, and existing accounts from those countries will be disabled on June 21, 2018. In addition to restrictions on these 11 territories, new users on the Bithumb platform will be required to carry out a KYC (Know Your Customer) verification process using their mobile phone numbers and physical residential addresses to ensure that nobody gets away with falsifying information about their identity and location.
Bithumb offered a quote in the press release stating:
“We will strictly enforce our own rules and protect our investors, and we will actively cooperate with the authorities. We will lead the standards of the Worldwide Codex Exchange with autonomous regulation ahead of schedule.”
The unprecedented action by Bithumb is another sign that cryptocurrency trading is well on its way to becoming regulated by financial authorities in Asia and around the world.