The deadline for South Korean crypto exchanges to meet new compliance requirements is fast approaching. All operators expected to submit requests for official licenses to the Financial Services Commission (FSC) by September 24.
For much of the past year, industry actors. And representatives for smaller exchanges have fought the new requirements but without success. According to reports, close to 40 of the estimated 60 crypto operators in the country will be forced to shut down.
The requirement is that all crypto exchanges show proof. That they are operating using real-name accounts at South Korean banks is at the heart of their objection. Customers have expressed a strong desire for more protection for their assets held on smaller crypto platforms. According to the FSC. Except for the country’s top four trading platforms, South Korean banks have largely refused to participate in any risk assessment process for applicant exchanges.
These four exchanges – Upbit, Bithumb, Korbit, and Coinone – already account for over 90% of total traded volume in South Korea. And experts have argued in recent months that the FSC’s new framework will further cement the country’s crypto market as a monopoly.
The mass exchange closures will result in the abolition of 42
Furthermore, according to Kim Hyoung-joong, a professor and the director of Korea University’s Cryptocurrency Research Center, the mass exchange closures will result in the abolition of 42 “kimchi coins,” which are smaller altcoins that are listed on smaller platforms and traded against the Korean won. The head of local crypto exchange Foblgate, Lee Chul-yi, told the Financial Times:
“A situation similar to a bank run is expected near the deadline as investors can’t cash out of their holdings of ‘alt-coins’ listed only on small exchanges. […] They will find themselves suddenly poor. I wonder if regulators can handle the side-effects.”
With altcoins accounting for 90 percent of traded volume in South Korea’s crypto markets. The FSC has reportedly advised exchange operators to notify their clients by Sept. 17 if they plan to close. Moreover, customer protection is unlikely to be a priority for those exchanges facing imminent closure. According to Cho Yeon-haeng, president of the Korea Finance Consumer Federation. And “huge investor losses” are expected as a result of asset freezing. And trading suspension on smaller platforms.
International exchange operators affected by the regulatory heat. Binance has already put a stop to Korean won trading pairs this summer in order to avoid offending Korean authorities.
Moreover, the new regulations intended to temper Koreans’ enthusiasm for cryptocurrency trading, amid concerns. That retail investors, particularly those from younger generations. Furthermore, borrowing excessively to trade in the face of stagnant wages, a jobless labor market, and rising real-estate prices.