As the risk of a mass of crypto exchange closures grows, a key South Korean media source and industry experts have warned that a “coin run” could occur next month.
A wave of crypto liquidations could occur in the coming weeks when a number of exchanges close their doors.
This week, the market-leading cryptocurrency exchange Upbit in South Korea became the first trading platform to seek for an operating license. However, all exchanges must have anti-money laundering protocols in place, obtain information security certificates, and ensure that their clients all have trading platform-linked bank accounts verified by real names and social security numbers, according to the terms of the country’s first piece of crypto-specific legislation, which will become legally binding on September 24.
While Upbit looks to have crossed all of these hurdles previously, only a small number of competitors are likely to follow suit.
And, according to the Financial Services Commission (FSC), most exchanges will be forced to close unless the government provides them an eleventh-hour reprieve if they continue to operate without an authorization beyond September 24. Currently, banks are hesitant to develop relationships with cryptocurrency exchanges, with many stating that the risk is not worth it.
Experts now believe that “some small and medium-sized exchanges are concerned” that users may want to withdraw all of their cash from their platforms at the same time, which might overwhelm their systems and KRW reserves, as well as result in a major wave of crypto-to-fiat liquidations.
The media site warned that “large-scale” sell-offs and withdrawals are almost likely at this point, and that this “means that the possibility of a so-called ‘coin run’ is not small.”
Nobody knows how much money and crypto is now held on South Korea’s smaller exchanges, thus no one can forecast the extent of this “coin run.”
Chairman of the Korean Society of Fintech and professor at Korea University, Kim Hyung-joong, told the network:
“It is disappointing that there are no figures on the number of investors and the potential for future damage.”
As the deadline approaches, investors in the country have warned us that they are anxious.
According to the FSC, “one or two” trading platforms may submit applications before the end of August. However, the chances of new people joining this group are dwindling. The FSC has denied down industry pleas for a deadline extension, and political efforts to amend the law have also ran out of time.
Im Yo-Song, Chairman of the Korea Digital Asset Business Association, noted in the same report:
“[Exchanges] continue to knock on banks’ doors. The banks, on the other hand, have no intention of considering or accepting our applications at this time. As a result, as things stand, we won’t be able to meet the regulatory requirements.”