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South Korea’s leading financial regulator, the Financial Services Commission (FSC), among other watchdogs in the country, is gearing up to shut down multiple crypto exchanges in the coming days. A report unveiled this news on September 16, noting about 35 exchanges out of 63 have not met the requirements to register with the Financial Intelligence Unit. These requirements are getting ISMS certification and securing real-name bank accounts for clients.
According to the report, the certification process takes three to six months and the deadline is only eight days away. Moreover, the FSC has instructed unregisters exchanges of potential closure by September 17. As such, it will be virtually impossible for exchanges that have not already gotten the approval to secure licenses on time.
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However, most of the platforms facing closure have small volumes, and the impact of their removal is likely to be marginal. Per Noh Woong-rae, a lawmaker from the ruling party, four of the largest crypto exchange in South Korea have already registered as legal trading platforms. These are Upbit, Coinone, Bithumb, and Korbit. Together, these exchanges handle more than 97% of the country’s crypto trading volume, according to the legislator.
Shutdowns to wipe $2.6 billion from South Korea’s crypto market
Traders that purchased Kimchi coins, cryptocurrencies that are mostly developed and traded by South Koreans are set to incur significant losses. Reportedly, the regulators intend to shut down most of these coins because they don’t have an inherent value and lack purpose. These features make it difficult to compute their value or estimate the impact of their disappearance from the market.
However, market watchers estimate that $2.6 worth of crypto assets will be lost when regulators shut down the unregistered exchanges and around 44 Kimchi coins.
According to Lee Chul-yi, the Head of Foblgate, a medium-sized exchange in the country,
A situation similar to a bank run is expected near the deadline as investors can’t cash out of their holdings of altcoins listed only on small exchanges. They will find themselves suddenly poor. I wonder if regulators can handle the side-effects.
This news comes as operators of small exchanges in the country continue crying foul. For instance, Do Hyun-su, the CEO of ProBit, pointed out that NH Nonghyup Bank notified Bithumb and CoinOne to bolster their anti-money laundering capabilities before granting them real-name bank accounts for their users. However, small exchanges did not get the same privileges. According to Hyun-su, banks did not tell other exchanges what they should change to secure real-name accounts.