Exchanges in South Korea have only a week to register and comply with new regulations that will go into effect soon. However, as predicted, the implementation of new regulations will result in the closure of more than 60 crypto-exchanges. In fact, these exchanges have until Friday to notify their respective client bases.
The new regulations require exchanges to register with the Financial Intelligence Unit by September 24, and to provide an Internet Security Agency security certificate. Exchanges must also collaborate with banks to ensure real-name accounts.
Many banks, however, refused to extend their deals due to the small size of some exchanges. The Financial Services Commission states that
“If some or all services must be closed, (exchanges) should notify customers of the expected closing date and withdrawal procedures at least seven days before the closure.”
According to reports, nearly 40 percent of all cryptocurrency exchanges will suspend all services, while 28 others with Information Security Management System [ISMS] certificates have failed to secure bank partnerships.
Currently, only the “big four” exchanges – Upbit, Bithumb, Coinone, and Korbit – have met all of the legal requirements. They will also be permitted to reach Won settlements.
In the meantime, smaller exchanges such as ProBit, Cashierest, and Flybit have already announced the end of Won trading. For the time being, these exchanges will only offer digital coin trading services, pending the establishment of partnerships with banks.
South Korean crypto-traders may face $2.6 billion in losses as crypto-exchanges suffer, according to reports.
According to the Head of the Cryptocurrency Research Center at Korea University, the mass shutdown could result in the abolition of 42 so-called kimchi coins – alternative cryptos listed on local exchanges and mostly traded in Korean Won. Other digital coins account for roughly 90% of all crypto-trading volume in South Korea.
According to Cho Yeon-haeng, President of the Korea Finance Consumer Federation, the impending implementation of these regulations may result in “huge investor losses.”
“Huge investor losses are expected as trading is suspended and assets are frozen at many small exchanges, as customer protection is unlikely to be a priority for those exchanges facing closure.”
This will also have an impact on the trading of the Korean Won, which is the third-most widely used currency for Bitcoin trading after the US dollar and the Euro. The Won accounts for about 5% of global trading after the US dollar and the Euro.