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Many of South Korea’s 200 cryptocurrency exchanges are suffering from an “existential crisis” as they struggle to meet regulatory approval requirements to shake up one of the world’s largest cryptocurrency markets.
To earn a trading license as a legitimate trading platform, Korean exchanges with local banks are required to open real-name bank accounts for customers. But banks are worried that they could be held responsible for money laundering in digital currencies.
Now, the Financial Services Commission is reaching the deadline of September 24, and only a few exchanges will meet the requirements, reflecting the pressure of thousands of cryptocurrencies that have been created while tightening regulation by regulators around the world. market.
“A lot [global crypto] the industry is afraid of a frightening scenario regulated by four exchanges like South Korea, ”said a crypto market official.
There are four major exchanges in South Korea’s crypto trade – Upbit, Bithumb, Korbit and Coinone. They are expected to survive as they partner with banks like Shinhan, NH and K-Bank to provide real-name accounts for cryptocurrency trading. Upbit and Bithumb said they were preparing to enroll in the FSC.
Smaller exchanges say the new regime favors larger operators at their expense. “We are facing an existential crisis. We want to legitimize our business, but banks don’t allow us to offer real-name accounts, ”said Lee Chul-ie, head of Foblgate, the country’s fifth-largest exchange with 100,000 members.
“There will be more problems if all these exchanges are allowed to operate in the gray area. We may need to take our business offshore. ”
Some experts said greater regulatory control was needed because many exchanges in the country lacked measures to protect investors and transparent transactions.
“The market is crowded with too many trading platforms. Official registration is necessary to clear the market, although there may be short-term confusion, ”said Hwang Seiwoon, a researcher at the Korean Capital Markets Institute.
The closure of many exchanges is likely to slow the crypto frenzy in South Korea, one of the world’s busiest crypto markets, as the country unites. global reduction in digital assets, its prices have come under pressure since mid-April rise earlier this year.
Young South Koreans have proven to be enthusiastic buyers of virtual assets, which has helped improve the price of bitcoin compared to other US countries in Korea. That premium changes dramatically, but rose more than 20 percent last week, according to data provider CryptoQuant.
“The new law puts us in place,” said a senior bank official. “It will be difficult for us to open new agreements with cryptocurrencies, given the inherent risks involved in cryptocurrency trading, unless the government provides clear guidelines.”
Conservative banking policy has intensified with recent financial authorities ’warnings about cryptocurrencies. Bank of Korea Governor Lee Ju-yeol said in February that the cryptocurrency had no “inherent” value.
Eun Sung-soo, the country’s chief financial regulator, said at a parliamentary hearing last month: “That’s my honest feeling [investors] do not enter [this market]. Cryptocurrency cannot be recognized as a currency, so the government cannot protect those who invest in virtual assets. ”
South Korea has a large population for the cryptocurrency trade, with a daily turnover of more than $ 20 billion in local exchanges, more than triple the country’s retail investors ’volume of daily sales.
But it remains a largely unregulated market, which has allowed regulators to call for “illegal activities” related to virtual assets in the “special enforcement period” from April to June.
The government also plans to impose a 20% tax on profits of more than $ 2.5 billion ($ 2,200) from the cryptocurrency trade starting next year.
These measures do not encourage young people to buy digital coins in the face of high youth unemployment and rising house prices.
“I find the stock market boring with low volatility. You can get rich quick with cryptocurrency investments, even if the risks are greater, ”said MH Change, a 30-year-old tennis coach, even though his Won30m has recently halved in value at cryptocurrencies.
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