wordpress blog stats
Connect with us

Hi, what are you looking for?

South Korean traders may lose billions as Seoul tightens its grip on crypto exchanges

The fallout is from South Korea’s stringent new regulations requiring trading licences and tie-ups with local banks.

Nearly 40 crypto exchanges out of an estimated 60, may wind up operations by September 24 in South Korea, according to a report by Financial Times. South Korean cryptocurrency traders stand to lose more than $2.6 billion due to the shutdown, the report added.

The shutdown is the fallout of new rules laid down by the Financial Services Commission (FSC), South Korea’s financial regulatory body, under the Financial Transactions Report Act. Under the law, foreign and local exchanges will have to register as legal trading platforms, the FT report stated. The FSC said that the rules will enhance consumer protection and prevent unlawful activities. 

South Korean crypto exchanges must tie up with local banks to open traceable bank accounts for customers in order to obtain a licence to be a legal trading platform. This will effectively lead to banks shunning smaller exchanges for fear of being exposed to illegal transactions, and dealing with only major exchanges in the country, a Stockhead report explained. 

The four exchanges commanding 90 percent of the crypto market in South Korea are: 

  • Upbit 
  • Bithumb
  • Coinbit
  • Coinone

South Korea is one of the biggest crypto markets in the world. Digital currencies, especially crypto, have witnessed an enthusiastic uptake among young South Koreans because of rising unemployment and surging housing prices. The regulatory overhaul comes at a time when the entire world is grappling with regulating an industry difficult to not only control but also monitor. These rules might set a precedent for other countries to follow as they prepare to regulate the sector in their territories.

What are the other implications of the rules?  

As many as 42 kimchi coins are set to disappear once the deadline expires in two weeks, FT revealed in its report. These coins are listed on small exchanges which are set to be shuttered come September 24.

Advertisement. Scroll to continue reading.

Kimchi coins can be described as crypto assets or alternative digital currencies developed within South Korea. They are bought and sold mostly in Korean won, South Korea’s fiat currency. The won is also the third most popular currency in the world with which people trade in crypto, as per Coinhills data. 

“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,” Lee Chul-yi, head of Foblgate, a mid-sized exchange, was quoted as saying by FT.  

Global exchanges offering won trading will also be affected by the new rules. Binance, the world’s biggest crypto exchange, suspended its won-to-crypto trading service in order to be in compliance with the law which only allows crypto-to-crypto trading. 

Crypto sector’s tussle with regulators around the world

Crypto has been facing heat from lawmakers across the world because of its legal and economic implications.

  • India has been on the fence about cryptocurrencies for a long time. The Indian central bank first banned it in 2018 and then the ban was overturned by the Supreme Court of India in 2020. A crypto bill is pending before the Cabinet for its approval and is likely to be introduced in the Parliament soon. The government is now planning to classify it as an asset and tax it accordingly.   
  • Nigeria limited crypto when the Central Bank of Nigeria (CBN) issued a circular in February this year asking commercial banks and other financial institutions to close accounts transacting in, or operating on, cryptocurrency exchanges. All deals involving cryptocurrency are now “prohibited” with “severe regulatory sanctions” awaiting erring outfits. The crackdown by Nigeria’s central bank on cryptocurrency caused outrage among the public because the virtual currency has boomed in the country in the last five years. 
  • Turkey’s central bank banned the use of cryptocurrencies and crypto assets to purchase goods and services, citing “irreparable” possible damages and significant risks in such transactions. It added that cryptocurrencies and other such digital assets based on distributed ledger technology could not be used, directly or indirectly, as an instrument of payment. It is legal to trade and hold crypto in the country which is planning to introduce legislation in October this year.
  • China banned financial institutions and payment companies from providing crypto-related services in May. There were mass arrests in China of people suspected of using cryptocurrencies in nefarious ways in June. Weibo, China’s version of Twitter, also suspended crypto-related accounts. China’s crackdown triggered a meltdown in the crypto markets as it also outlawed mining-related activities. China was the epicentre of crypto mining in the world.  

Interestingly, El Salvador recently became the first country in the world to accept Bitcoin as legal tender with many more countries expected to follow suit.  

Also read:

Have something to add? Post your comment and gift someone a MediaNama subscription.

Advertisement. Scroll to continue reading.
Written By

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

Views

News

The US and other countries' retreat from a laissez-faire approach to regulating markets presents India with a rare opportunity.

News

When news that Walmart would soon accept cryptocurrency turned out to be fake, it also became a teachable moment.

News

The DSCI's guidelines are patient-centric and act as a data privacy roadmap for healthcare service providers.

News

In this excerpt from the book, the authors focus on personal data and autocracies. One in particular – Russia.  Autocracies always prioritize information control...

News

By Jai Vipra, Senior Resident Fellow at Vidhi Centre for Legal Policy The use of new technology, including facial recognition technology (FRT) by police...

You May Also Like

Advert

135 job openings in over 60 companies are listed at our free Digital and Mobile Job Board: If you’re looking for a job, or...

News

Rajesh Kumar* doesn’t have many enemies in life. But, Uber, for which he drives a cab everyday, is starting to look like one, he...

News

By Aroon Deep and Aditya Chunduru You’re reading it here first: Twitter has complied with government requests to censor 52 tweets that mostly criticised...

News

Google has released a Google Travel Trends Report which states that branded budget hotel search queries grew 179% year over year (YOY) in India, in...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Name:*
Your email address:*
*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ