Majority of Korean crypto exchanges shut down this month, insiders say

The deadline for South Korean crypto exchanges to meet new compliance requirements looming, with all operators expected to submit officia...

The deadline for South Korean crypto exchanges to meet new compliance requirements looming, with all operators expected to submit official license applications to the Financial Services Commission (FSC) by September 24. .

Industry players and representatives of small stock exchanges have disputed the new requirements for much of the past year, but to no avail. Now insiders would have Expect nearly 40 of the country’s 60 crypto operators to be forced to shut down.

The crux of their objection has been the requirement that all exchanges show proof that they are operating using real name accounts at South Korean banks. The FSC justified itself by arguing that there is a strong demand from customers for more protection for their assets held on smaller crypto platforms. Still, South Korean banks have, for the most part, refused to engage in a risk assessment process for candidate exchanges, with the exception of the country’s four major trading venues.

These four exchanges – Upbit, Bithumb, Korbit and Coinone – already account for over 90% of the total volume traded in South Korea, and experts have argued in recent months that the new FSC framework is set to go further away. cement the country’s crypto space as a monopolized market.

What’s more, estimates from Kim Hyoung-joong – professor and director of Korea University’s Cryptocurrency Research Center – predict that mass trade closures will wipe out 42 “kimchi coins” – a nickname for small altcoins which are listed on smaller platforms and traded for Korean won. Lee Chul-yi, head of local crypto exchange Foblgate, told the Financial Times that:

“A situation similar to a bank run is expected as the deadline approaches, as investors cannot cash in their holdings of alt-coins listed only on small exchanges. […] They will suddenly find themselves poor. I wonder if the regulators can handle the side effects.

Related: Regulations push Korean stock exchanges to delist, warn of high-risk coins

With altcoins estimated at 90% of the volume traded in South Korea’s crypto markets, the FSC has reportedly advised exchange traders planning to shut down to notify their clients no later than September 17. Cho Yeon-haeng, chairman of Korea Finance Consumer Federation, said protecting clients is unlikely to be the top priority for exchanges facing impending shutdown and therefore “huge losses for investors” are expected in the future. due to the asset freeze and the suspension of trading on smaller platforms.

Regulatory heat will also affect international trade operators. Binance already has Korean Won Trading Pairs Preventively Suspended this summer to make sure it doesn’t interfere with Korean authorities.

The new measures were designed to dampen Korean enthusiasm for cryptocurrency trading as retail investors, especially those of the younger generations, over-borrow to trade as they struggle against suppressed wages, a frozen labor market and ever higher real estate prices.