Small Crypto Exchanges fear to shut down in South Korea - TCR

Intro: The cryptocurrency exchanges operating in South Korea do not see any future in the country. Since the small exchanges are unable to fulfill the regulatory authority’s requirements, they fear the existential crisis. There are over 200 crypto exchanges in the country. Out of which the 4 biggest exchanges have fulfilled the requirements of the regulators. Others’ futures are still hanging in the middle. 

Just a month ago, Eun Sung-soo, Chairman of the Financial Services Commission (FSC), one of the top financial regulators from South Korea, had warned the cryptocurrency exchanges in the country could be shut down. 

With the September 24 deadline to register the cryptocurrency exchange under the FSC looming over, the 200 crypto exchanges in the country fear their existential crisis. It is because they are facing problems in meeting the conditions of the regulatory approval. This is a big setback for one of the world’s biggest cryptocurrency markets. 

As per the regulatory authorities plan, an exchange must partner with local banks to open real-name bank accounts for customers. But banks feel that if untoward events like money laundering could happen, then they will be liable for it. The cases of money laundering, frauds are quite extensively increasing in the digital currency sphere. It is a matter of concern for banks all over. 

Deadline ahead

As the deadline for the business registration is near, many exchanges fear shutting down, and only a few of the exchanges in the country would be able to meet the requirements.

This means that thousands of other crypto exchanges’ futures are in the hands of the regulators who have tightened their grip on the cryptocurrencies. 

There are only four major crypto exchanges in South Korea, namely Upbit, Bithumb, Korbit and Coinone. These exchanges have fulfilled the requirements of the regulators. And are linked with banks like Shinhan, Nonghyup and K-bank to offer real-name accounts for cryptocurrency trading. 

The real-time difficulty for small Exchanges 

But the exchanges that are small in size cannot fulfil these requirements. They believe that only the big fish will survive under the circumstances. And the small ones will be dealing with the existential crisis. This is because the banks are not ready to offer real-name accounts to small-time exchanges. 

But it could cause more issues if these exchanges start operating in the grey area as there will be no hold of any authority.

On the other hand, some experts believed that regulatory control was the need of the hour as many exchanges in the country do not have measures for investor protection and security. The transactions are also not transparent. 

With regulatory authority coming into the picture, the investors’ money is secured. And there will be full transparency in the transactions. 

In April 2021, Chairman Eun had explained that the crypto exchanges would be required to register with the FSC under the revised Special Funds Act. The revised bill went into effect on March 25, and the provisions will be imposed on September 24. 

According to the act, the exchanges had to acquire the Information Security Management System (ISMS) certification and issuance of real-name accounts.

But with the banks’ reluctance to issue real-name accounts to small exchanges, there is no doubt that there will be a mass shutdown of exchanges in the country.