According to Korean’s highest financial regulator, the Financial Services Commission (FSC), foreign and domestic exchanges in Korea must apply for an operating license by September 24 in order to register as a legal platform. However, most of them have difficulty meeting the necessary conditions. As a result, almost 40 of the roughly 60 South Korean crypto service providers are threatened with closure.
Most Korean exchanges are in danger of closing this month
Cho Yeon-Haeng, President of the Korea Financial Consumer Federation, said:
“Investors will suffer enormous losses if the exchange is suspended. In addition, their assets on small exchanges were also frozen. Because customer protection may not be a priority for exchanges that are about to close. “
One of the necessary requirements for a licensed crypto exchange to become a legitimate trading platform is to partner with a local bank. You will need to provide proof that you have real name accounts with Korean banks. However, domestic credit institutions are cautious because of the money laundering risk. And most of the country’s banks are refusing to take part in a risk assessment process for crypto exchanges, with the exception of the top four in the country.
These four exchanges, Upbit, Bithumb, Korbit, and Coinone, account for more than 90% of Korea’s total trading volume. Trading platforms in other countries also have similar difficulties in maintaining relationships with their financial institutions. In Australia, for example, many crypto traders and exchanges are struggling to find new lending institutions after being abandoned by a credit union.
Indeed, investors could lose up to $ 2.6 billion as two-thirds of South Korean crypto exchanges prepare to close due to a regulatory overhaul. So far, around 20 exchanges have met a number of regulatory requirements by creating a security system for customers’ personal data.
The regulatory heat will also affect international exchanges. Binance paused Korean won trading pairs this summer to make sure it doesn’t upset South Korean authorities.
The new regulations were designed to limit the Korean craze for crypto trading. Especially in the context in which private investors, especially the younger generation, take out too much loans to trade cryptocurrencies while they are still struggling with stifled wages, market jobs froze and real estate prices skyrocketed.
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