New platform regulation in South Korea forces a majority to close its doors
Last July, the news had chilled the cryptocurrency sector in South Korea, once considered a very open country on the subject. This government provision indeed provides that all platforms that allow the purchase and sale of digital assets must be registered with the local Financial Services Commission (FSC).
Although the FSC’s statement seems to target only foreign platforms, all exchanges, local and international, will have to obtain a license in order to continue offering services to South Koreans. The deadline is set for September 24.
Players in the cryptocurrency sphere are critical of this new regulation, especially in that it requires a bank account in South Korea. However, local banks are a bit like French banks, namely rather skittish on the subject.
A regulation that worries the cryptocurrency sector in South Korea
Industry players and representatives of small exchange platforms have challenged the new regulation imposed on them. According to some reports, out of the 60 platforms operating in South Korea, 40 may leave the country or simply go out of business.
As mentioned above, the protest focuses on the requirement to have a bank account in South Korea. Moreover, this bank account must be opened in the operator’s name and not in the name of the operating company.
According to the FSC, this measure was requested by investors so that their funds would be better protected. It must be said that the list of pirated platforms in South Korea is rather large. Upbit in May 2020 and Bithumb twice in 2018 and 2019 come to mind.
In addition, if South Korean banks refuse as a matter of principle to navigate around crypto-assets, they nevertheless make exceptions with the four largest exchange platforms in the country: Upbit, Bithumb, Korbit and Coinone. Despite the presence of two exchanges that have been subject to hacks, this quartet concentrates more than 90% of the transaction volume in South Korea.
The FSC would ipso facto be creating, not a monopoly, but at least a true concentration of the buying and selling of digital assets in the hands of a few. Large platforms will also be excluded from this concentration and Binance has already suspended pairs with the South Korean won.
South Korea continues to close the doors to cryptomonnaies
Once very open about crypto-currencies, South Korea is now taking a turn towards strict regulation. Since March 2021, the exchange ofanonymous digital assets like Monero (XMR) has been banned and the new measure seems clearly aimed at encouraging investors to turn to other types of assets.
Crypto-currencies are very popular in South Korea and particularly affect the youth, undermined by a closed job market and exponentially rising property prices.
Yet, these people can sometimes borrow money in order to invest through derivatives like leverage and margin trading. This may have caused some investors to suffer heavy losses and the regulator wanted to react.
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About the author: Benjamin Allouch
Formerly a lawyer specialized in personal data and digital law, I quickly became interested in Bitcoin, blockchain technology and their legal implications. I am now a freelance consultant and writer in the field of cryptocurrencies and blockchain.
All articles by Benjamin Allouch.