Tens of crypto exchange in South Korea may be wiped out, causing investors to lose up to $2.6 billion
According to South Korea highest financial regulator, the Financial Services Commission (FSC), by September 24, foreign and domestic exchanges in Korea are required to submit a request for a license to operate official. However, most of them struggled to meet the necessary conditions. As a result, nearly 40 of the approximately 60 South Korean crypto service operators are predicted to close.
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The majority of South Korea exchanges will close this month
“Huge investor losses are expected with trading suspended and assets frozen at many small exchanges as customer protection will not likely be the priority of those exchanges facing an imminent closure,” said Cho Yeon-Haeng, president of Korea Finance Consumer Federation.
One of the requirements for a licensed crypto exchange to become a legitimate trading platform is to partner with a local bank. They must show proof that they are operating using real-name accounts at Korean banks. However, domestic lending institutions are hesitant because of the risk of money laundering. And most of the country’s banks refuse to participate in any risk assessment process for crypto exchanges, except for the country’s top four.
These four exchanges, Upbit, Bithumb, Korbit, and Coinone, account for more than 90% of Korea’s total trading volume. Trading platforms in other countries have had similar difficulties maintaining relationships with their financial institutions. In Australia, for example, many crypto traders and exchanges have struggled to find new lending institutions after being abandoned by a co-op bank.
And, as two-thirds of South Korean crypto exchanges prepare to close due to a regulatory overhaul, investors could lose up to $2.6 billion. Up to now, about 20 exchanges have met several regulatory conditions by creating a security system for customers’ personal information.
The regulatory heat will also affect international exchanges. Binance paused Korean won trading pairs this summer to ensure it didn’t upset the South Korean authorities.
The new regulations have been designed to curb South Korean enthusiasm for crypto trading. Especially in the context that retail investors, especially those from the younger generation, are borrowing too much to trade cryptocurrencies. While they are still struggling with stifled wages, the market jobs froze, and real estate prices skyrocketed.
Read more:
- South Korea Moved To Shut Down 11 Local Crypto Exchanges Over Their Involvement In Illicit Activities
- Cryptocurrency Exchanges Are Considering Filing A Lawsuit Against The South Korean Government For Shirking Its Supervisory Responsibility