Several of South Korea’s crypto exchanges and ‘kimchi coins’ face extinction
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It’s expected that two thirds of South Korea’s crypto exchanges will be forced to close due to an impending regulatory crackdown, which has raised concerns Korean investors could lose a total of US$2.6 billion in assets.
If the South Korean crypto industry wanted regulatory clarity, it’s getting it in no uncertain terms.
On September 24, South Korean regulators will bring their new Financial Transactions Report Act into play, which will require all local crypto exchanges to to register with the Financial Services Commission (FSC) by the end of the month.
The crux of the compliance law is that, in order to toe the line with South Korea’s anti-money laundering and KYC (know your customer) measures, crypto exchanges must be registered with local banks, with traceable accounts for all customers.
"South Korean cryptocurrency traders are bracing for losses of more than Won3tn ($2.6bn) as two-thirds of the country’s crypto exchanges are set to be wiped out in a regulatory overhaul " https://t.co/nVzOikoXk0
— Barbarian Capital (@BarbarianCap) September 13, 2021
According to a Financial Times (FT) report, about 40 of South Korea’s 60 crypto exchanges are yet to register with the FSC, with at least one expert fearing the consequence will be the wipeout of investor assets.
Speaking to the FT, Lee Chul-yi, head of medium-sized Korean exchange Foblgate, said:
“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.”
According to Investopedia, a “bank run” occurs when the majority of customers of a bank or other financial institution withdraw deposits simultaneously over concerns of the bank’s solvency/ability to trade.
As for the FSC, it is reportedly introducing the stricter measures in order to provide greater consumer protection for Korea’s enthusiastic crypto-investing population.