Two-thirds of exchanges will close due to South Korea’s requirements. After September 24, 40 of the approximately 60 cryptocurrency exchange operators in South Korea will cease operations, due to non-compliance with the Financial Services Commission (FSC) requirements. The Financial Times reported this.
Among other things, the rules include ensuring compliance with KYC procedures together with partner banks. Thus, credit institutions are reluctant to expand cooperation with trading platforms, fearing additional attention from financial regulators.
The FSC ordered the exchanges to receive registration by September 24 and notify customers of a possible closure by September 17 if they fail to pass this step.
According to the publication, only 20 firms fulfilled the requirements. Earlier, the department registered the largest platforms of the country, such as Bithumb, Upbit, Korbit and Coinone. Moreover, they account for 90% of the total trading volume with digital assets in South Korea.
Huge losses for investors
“We expect huge losses for investors due to the suspension of trading and freezing of assets on many small exchanges. Customer protection is not likely to be a priority for such platforms, ” said Cho Yeon-haeng, president of Korea Finance Consumer Federation.
The Financial Times estimated the assets that may be in an uncertain status at 3 trillion won (~$2.6 billion).
Pressure from the regulator can lead to the disappearance of 42 coins in pairs with won. Kim Hyoung-joong, a professor and head of the Cryptocurrency Research Center at Korea University provided this data.
“We expect a kind of “banking panic” as the FSC deadline approaches. Investors may face losses. Is the regulator ready for this?”, – asked the CEO of the Foblgate exchange Lee Chul-ie.
The restrictions affected trading
The FSC requirements also affected foreign bitcoin exchanges that serve South Korean citizens. In August, Binance banned customers from using the South Korean won in operations on its platform. The restrictions affected trading, P2P transactions and deposit payments.
Recall that in July, residents of South Korea had to report their assets on foreign crypto exchanges to comply with tax legislation.
According to local media, every fourth student in South Korea invests in bitcoin. In April, some employers noted that their employees aged from 20 to 30 years are distracted by tracking fluctuations in the price of the first cryptocurrency. Or they quit in order to fully devote themselves to trading.