Written by Nezwan Helmy
The Financial Services Commission (FSC) in South Korea has set a deadline for foreign and local cryptocurrency exchanges to register as legal trading platforms, failing to meet which, they will be barred from operating. The authority has set a deadline of September 24 for exchanges to comply with the regulations.
It has been decided that South Korea will adopt this regulation in an effort to enhance oversight of the country’s growing cryptocurrency sector. Yet as a consequence, almost two-thirds of all crypto exchanges across the nation will be forced to close their doors.
SK’s Crypto Exchanges Must Adhere To National Laws
Over sixty cryptocurrency exchanges in South Korea have been ordered to notify customers of a partial or full halt in trading at least one week before a new regulation takes effect, according to the government.
For exchanges to continue operating, its government demands that they register with them by September 24 and present a security certificate, given by the nation’s Internet Regulation Agency. All exchanges that have not yet registered will be forced to close their doors after the deadline.
South Korea’s FSC has encouraged exchanges that fail to meet regulatory standards to inform their customers of any possible closures by September 17.
Rush Moment for Most Crypto Exchanges
Earlier this week, the FSC announced that if a portion, or all of a financial institution’s services need to be shut down, the exchanges must notify customers of the expected closure date and methods for withdrawing funds at least seven days before the shutdown.
Approximately 40 out of the estimated 60 cryptocurrency operators in South Korea are preparing to fully shut down their businesses, according to the latest estimates.
According to a local news agency, as of Friday 17, less than 30 exchanges were fitted with the appropriate system which had been authorised by authorities. This measure was intended to proactively reduce the likelihood of security breaches occurring in the future.
So far, just four cryptocurrency exchanges (which account for the majority of crypto activities in South Korea) have formally joined up to the government’s crypto regulation: Bithumb, Coinone, Korbit, and Upbit, with others expected to follow.
Anticipated Loss of $2.5 billion Among Local Investors
As a consequence of the regulation reform, about two-thirds of South Korea’s cryptocurrency exchanges are planning to shut their doors. It is conceivable that investors may lose up to 3 trillion Won (about $2.5 billion) as a result of this situation.
The widespread shutdown of smaller exchanges may also result in the elimination of more than forty “Kimchi coins” which are now legal tender in Korea. They are alternative digital currencies that are listed on local exchanges and are mostly traded in Korean won, as opposed to bitcoin.
In the words of Cho Yeon-Haeng, president of the Korea Finance Consumer Federation, “Huge investor losses are expected as trading is halted and assets are frozen at many minor exchanges,” as “consumer protection will not likely be a priority for those exchanges that are facing imminent collapse.”
With more than 25 foreign exchanges that do business with Korean investors having received notification from South Korea’s FSC on this matter, it is likely that the limitations will also have an effect on global exchanges that offer Won trading services.