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Highlights
- South Korea’s Financial Services Commission (FSC) has given the smaller cryptocurrency exchanges time till September 24 to apply for an official license.
- If they fail to comply, they could lose their right to operate in the country.
Cryptocurrencies have been popular amongst the youths of South Korea. In fact, it’s so popular that the crypto apps have tripled in the last two years and today it stands at 2 million. As per Statista, the number of trading pairs on leading exchanges Upbit and Bithumb in August 2021 stood at 255 and 249, respectively.
One of the primary reasons why cryptocurrencies are so popular in South Korea is the young population who are seeking alternative ways to earn money. South Korea was one of countries, which adopted of the digital mode of currency at a nascent stage, and its popularity specially grew during the Covid-19 period.
Fueled by its growing popularity and government’s positive outlook of embracing the new means of finance, many crypto exchanges have flourished in the country. However, with increased acceptance comes new ways of exploiting the medium. The regulatory authorities are now seeking new ways to strengthen the crypto space in the country with stringent rules and stronger rules for exchange licensing.
Crypto operators brace for closure
According to a new rule implemented by the South Korea’s Financial Services Commission (FSC), smaller cryptocurrency exchanges are bracing for a shutdown. They have been given time till September 24 to apply for an official license with the FSC. If they don’t comply by the said period, they stand to lose more than Won3tn (US $2.6 billion). The country’s crypto trading market is largely dominated by four big exchanges -- Upbit, Bithumb, Korbit and Coinone. The rest are of the local exchanges are not to equipped to comply the rules and that’s a major cause of concern for the investors.
This would influence the kimchi coins, which is a form of an alternative digital currencies that are listed on local exchanges and are traded in Korean won. According to data from Coinhills, Korean won is the third most widely used currency for bitcoin trading following Dollar and Euro.
Accounts closures and suspension
Investors too are at a risk of losing their investments if the regulatory authorities decide to freeze the accounts after the ban. President of Korea Finance Consumer Federation Cho Yeon-haeng believes that investors could have their accounts suspended with many of the exchanges not even ready to offer protection against it.
It is expected with this regulatory norm setting in, 40 of the 60 crypto operators could see their businesses getting closed. South Korea has been strict when it comes to regulatory norms. Binance, the leading crypto exchange, had to suspend its won-to-crypto trading service in order to comply with local regulations. This was the first such move from a large operator.
Conclusion
Time is ticking for the smaller crypto operators, and it will be the investors who will be at a risk of losing their savings. They would hope to get an extension on the same and are voicing their concerns. But will the government and regulatory authorities listen, only time will tell.
