- More than half of crypto exchanges in South Korea may announce service closure on Friday, Sept. 17.
- Most of these crypto exchanges are yet to fulfil the regulatory requirements stipulated by the country’s FSC.
Over 30 cryptocurrency exchanges in South Korea are likely to give notice of shutdown by the end of Friday, Sept. 17. Per an August announcement, the country’s Financial Services Commission (FSC) requires all crypto exchanges to be registered as legal trading platforms. This is stipulated in the anti-money laundering (AML) Act on Reporting and Using Specified Financial Transaction Information.
To fulfil this stipulation, exchanges needed to apply for the Information Security Management System (ISMS), for security breach limitation. Exchanges were also required to partner with local banks for KYC account creation. The FSC granted a six-month grace period to meet the above conditions. However, companies unable to do so by Sept 24, were given until Friday, Sept. 17, to announce service closure.
As industry sources tell, 24 exchanges have not applied for the ISMS and 10 more lack a certificate. Currently, only 28 out of the 66 exchanges in South Korea have the designated system. Out of these, only four giant exchanges, namely: Upbit, Bithumb, Coinone, and Korbit, have registered with the Financial Intelligence Unit (FIU), an AML body. The quartet also has the requisite ISMS and has a real-name bank account system in place.
South Korea and the crypto exchanges
The rest, however, are still struggling to make such accounts as banks are reluctant to forge partnerships with smaller exchanges. These exchanges are now limited to crypto-to-crypto trading. They include ProBit, Cashierest, and Flybit. On the other hand, the aforementioned quartet can trade between fiat and cryptocurrencies, after registration goes through.
Just a few hours ago, Upbit, became the first approved crypto exchange in the eastern Asian country. This follows a review held today by the FSC’s FIU. The FIU said in a translated statement;
Considering the results of the financial supervisory board’s report review and the discussion by the virtual asset provider reporting review board, we have decided to repair the report of the virtual asset provider of DOOMU,
The report review committee consisted of nine external civilian experts for fairness, objectivity, and professionalism. Other than the above four, Korean Digital Exchange (Flybit) and Koda, a trustee, have filed reports with the FIU.
Huge loses due
Notably, exchanges closures in South Korea could lead to huge investors losses of up to Korean won (KRW) 3 trillion ($2.6 billion). Additionally, the shutdown could eliminate 42 kimchi coins, professor Kim Hyoung-Joong of the Korea University estimates. These are digital currencies listed on local exchanges and traded mostly in KRW. Kimchi coins, other than Bitcoin, make up about 90 percent of South Korea’s crypto trading. Cho Yeon-haeng, president of Korea Finance Consumer Federation stated;
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,