South Korean authorities have revealed possible steps to regulate crypto-exchanges. Trading platforms founders and managers might get up to 10 years imprisonment for non-compliance.

The government of South Korea explained their regulatory steps towards a more controlled cryptocurrency market. In order to make transactions with cryptocurrencies more transparent and protect customers' rights, South Korea will oblige crypto-exchanges to comply with at least six requirements. According to the amendment, which still has to be adopted by the National Assembly, these requirements are as follows:

  1. comply with anti-money laundering and terrorism financing regulations (KYC/AML) and introduce obligatory user verification,
  2. ensure safe storage of keys,
  3. delegate fiat funds storage to third parties,
  4. warn users about the risks of trading cryptocurrencies,
  5. transparent store the order book
  6. deposit reserves in fiat.

Crypto-exchanges are given a six-month grace period to comply with the requirements after the bill is enacted. After that period those trading platforms which do not comply with the above mentioned requirements will be banned, and their managers and founders could get up to 500 million in fines or up to 10 years of imprisonment.

Transactions with cryptocurrencies will be treated as operations with foreign currencies.  Still, the ban on Initial Coin Offerings is planned to remain in force.

"The government should be aware of the current situation related to virtual money and keep a close watch on the situation," said a spokesman for South Korean president Moon Jae-in.