By September 24, all virtual asset business operators in Korea must complete the report. The operators who fail to report cannot operate it anymore. As a result, not only the four major exchanges (Bithumb, Coinone, Upbit, and Korbit), but also small and medium-sized exchanges are busy preparing it. This is not just the situation in Korea. As regulations on virtual assets are being strengthened worldwide, overseas exchanges are also responding to regulations.
What are the strategies of foreign exchanges in response to virtual asset regulations that vary from country to country?
National policies on virtual assets are completely different. Some countries, such as China, completely banned them as crime busting, while others, like El Salvador, have declared Bitcoin as a legal currency. However, most major countries are moving toward regulating virtual assets.
Overseas exchanges are struggling to come up with measures to respond to these regulations. There are cases where the exchange business is moved to another country to avoid regulation. In the case of Huobi China has already been transferred to Singapore, the United States and Japan due to China's regulation in 2017, and only blockchain R&D related projects are being carried out in China. However, in reality, fleeing to an unregulated country is not a solution because in most cases, the business will be prohibited if the regulations of the relevant country are not followed.
Therefore, it is necessary to actively respond to the regulations required by each country. In particular, it has been a long time since the establishment of a system for Anti-money laundering (AML) and Combating the financing of terrorism (CFT) that major countries have promised to participate in. However, unlike domestic exchanges, overseas exchanges deal with the entire world, so there is a concern that each country has to respond to different regulations. Accordingly, overseas exchanges are suggesting the establishment of a branch as a solution. It is a one-to-one customized response to the regulations of the respective country. For example, in the case of the Huobi Korea branch, in line with the Specific Financial Transactions Act (Special Act), it has strengthened AML by restricting the use of exchanges to high-risk countries and non-resident foreign members in Korea. In other words, Huobi Korea is on an equal footing with domestic exchanges that comply with the Korea’s Special Act.
Binance, the world's largest virtual asset exchange, is also responding to regulations by establishing a branch. Binance is facing its biggest crisis due to recent regulations. After the Japanese and Canadian governments had already ordered them to shut down, the British government also requested too. In response, CEO Changpeng Zhao said that it would take “practical measures” to comply with regulations.
The practical measures he announced are 'expanding the international compliance team', 'expanding compliance-related partnerships such as anti-money laundering AML', and 'establishing a branch that meets the regulations of each country'.
By establishing a branch, Binance plans to respond to regulations by establishing a regional-based exchange that meets the restrictions of each country and is linked to fiat currencies.
The reason that foreign exchanges are responding to regulations tailored to each country through the establishment of branches is
because restrictions on virtual assets vary widely depending on political or national economic conditions
Until now, there have been no clear guidelines from the virtual asset industry. Therefore, attention is focused on this action by Binance, the world's largest exchange. In other words, depending on Binance's regulatory response and its results, the industry's regulatory response direction may be somewhat outlined.
As such, it seems that foreign exchanges have established strategies to respond to regulations in a way that melts into each country. Attention is paid to the moves of overseas exchanges to see if such a response strategy will be successful and a regulatory response model will be presented.
U.S. regulations are so strict that they have been criticized for being overly complex.
China and India unconditionally regulated virtual assets because they believe the assets threaten the national economy