By midnight tonight, Friday, September 17, over 60 crypto exchanges in South Korea must notify their users of a full or partial suspension of trading. This is because a new law recently passed by the government comes into effect in a week’s time. In order to continue operating, crypto exchanges must register with the Financial Intelligence Unit by September 24, Reuters reports. The agency must issue a security certificate to that effect. The new law is about platforms only being allowed to offer bank-approved accounts. So crypto exchanges must now work with banks.
Exchanges that have not registered with the FIU will have to close before or on September 24. Those that have registered but have not yet partnered with banks will not be able to offer trading in won.
A representative of the country’s financial regulator commented:
If some or all services close, they must give customers at least seven days’ notice of the closure, as well as the procedure for withdrawing money. This is to be done no later than September 17.
So far, 40 exchanges have to register, while another 28 have to take care of bank partnerships. For this second group, the required security certificates are already in place.
Only 4 compliant exchanges in the country
Of all the crypto exchanges in the country, only four have completed both registration and secure banking partnerships. They are Upbit, Bithumb, Coinone and Korbit. Some small exchanges have decided to stop trading the country’s currency. They plan to continue trading digital coins while agreements with banks are pending.
Crypto investors stand to lose $2.6 billion
About 70% of South Korean crypto exchanges are expected to close. That means investors could lose up to KRW 3 trillion, the equivalent of $2.6 billion. Cho Yeon-Haeng, president of the Korea Finance Consumer Federation, told the Financial Times:
‘Huge losses are expected for investors as trading has been suspended and the assets of many small exchanges have been frozen. Protecting the customers of these exchanges is probably no longer a priority.
Last year, the government amended existing laws to make AML/CFT obligations mandatory for all South Korean exchanges. It also introduced a requirement that firms obtain an operating license from the Financial Intelligence Unit.
The future of stock exchanges in South Korea
Aside from the proposed tax changes for cryptocurrencies, the government intends to continue working to bring the industry in line with anti-money laundering guidelines. It is too early to tell what impact the future measures will have on cash withdrawal rules, age limits or withdrawals of funds from electronic wallets.