The delisting of small altcoins and closure of exchange platforms could cost investors more than $2.6 billion.
Nearly two-thirds of South Korea’s crypto-currency exchange platforms could close due to non-compliance with new regulatory requirements, according to the Financial Times.
This bleak outlook for the Korean crypto-currency market comes as the deadline for exchange platforms to comply with the new requirements is only days away, but several platforms have yet to implement the given guidelines.
The Financial Services Commission (FSC) is requiring digital asset trading platforms to demonstrate, before the set deadline, that their transactions with customers are with real people holding bank accounts under their real names. According to the financial watchdog, the regulation is intended to protect customers and prevent activities such as money laundering and tax evasion.
As September 24 approaches, the Korean regulator expects all crypto exchanges to have adhered to the new requirements, in partnership with provider banks.
But according to the report, most of the country’s smaller platforms have yet to implement the required changes. As the publication notes, nearly 40 of the 60 crypto-currency platforms are at risk of having to close due to non-compliance.
Sources told the Financial Times that up to 42 small altcoins, known locally as “kimchi coins,” will be affected by an impending closure. With small platforms accounting for 90 percent of kimchi coins trading volume, the publication estimates that losses could exceed $2.6 billion.
According to Lee Chul-Yi of Foblgate, one of the smallest trading platforms, the crackdown will end with most traders “suddenly poor” due to withdrawal difficulties caused by the silver rush. According to Chul-Yi, the deadline will resemble a “bank run” with people scrambling to liquidate their assets.
The news appears to have sparked selling in the crypto-currency market on Monday morning. At the time of writing, the price of Bitcoin (BTC) has fallen below $45,000 and Ethereum below $3,250, after a 3% and 5% correction respectively.