This post has been previously publised by The Korean Times.

Banks will be required to ensure that their virtual currency exchange clients are classified as high-risk and subject to strengthened financial transaction monitoring and user ID verification, according to the Financial Services Commission (FSC), Sunday.

The lenders will have to deny services to customers that refuse to comply with ID verification procedures, and report suspicious transactions to the Korea Financial Intelligence Unit (KoFIU), an anti-money laundering unit under the FSC. The guideline is a regulatory action set to affect around 60 crypto exchanges operating without FSC permission, aimed at protecting customers against fraud and allowing them to get their money back if the exchanges shut down in the future. Currently, operators can set up exchanges without major regulatory hurdles including user ID verification responsibilities and real name-based exchange accounts.

Exchange operators seeking to keep running will have to submit a request for a license by Sept. 24, after which the intelligence unit will begin a three-month review of their trading activities. The unit plans to have exchanges terminate transactions made using borrowed or fake accounts starting this month. The measure came as a growing number of customers are voicing concerns about the lack of protection for their money held by small exchanges. Of over 60 exchanges, only four are using real-name accounts cleared by banks.

The intelligence unit asked banks to file a report after identifying the source of large transfers made to operators from accounts that are not clearly identified. Meanwhile, banks are seeking to limit their crypto management responsibilities by setting up a rule that would exempt them from punishment in cases of financial crimes with no premeditation at play.

The discussion will be led by the Korea Federation of Banks, joined by a number of commercial lenders. Their opinion will be delivered to the FSC soon. The collective move reflects concerns that banks can be held liable for financial crimes at the exchanges, if investors claim they trusted the organizations which had been reviewed by the banks.

“Banks are essentially forced to take responsibility for issuing real-name accounts. It therefore is reasonable that there should be some immunity for undertaking the dangerous and costly task,” an industry official said.

Whether the regulatory move will dramatically reduce the number of altcoins remains to be seen. Altcoin is an umbrella term encompassing almost all cryptocurrencies except for a few top-traded ones, characterized by their sketchy manufacturing processes and unreliable sustainability. This is why few believe altcoins will become a mainstream means of investment. Unlike investors around the world that mostly trade bitcoin, over 90 percent of crypto investments in Korea are made in altcoins, long criticized for a lack of accountability and high risk of losing money.