A new regulatory overhaul could bring 40 out of 60 exchanges in South Korea out of business after companies are expected to fail to meet the conditions proposed by the Financial Services Commission (FSC). This promotion could also affect holders of locally used “kimchi” coins that they cannot exchange for fiat on other exchanges. This could cause losses of more than $ 2.6 billion.
Dramatically reduce South Korea exchange options
A regulatory overhaul could drastically reduce the number of exchanges in South Korea. According to FT, 40 of the 60 exchanges operating in the country are expected to close due to failure to comply with the Financial Services Commission’s new regulatory framework. This rule, the deadline of which is the next September 24th, states that all exchanges must register with the institution in order to operate in the country.
However, many of these exchanges have no way of qualifying for it. The law states that every crypto exchange must work with a backing institution to open real-name bank accounts for customers. However, banks have refused to do so in order not to be linked to money laundering cases.
Closures meet local tokens
This crackdown will also have unintended consequences for local investors. Closing the small exchanges that fail to comply with these rules could cost Korean investors $ 2.6 billion in losses. This is because these exchanges list what are known as “kimchi coins,” a group of 42 small alternative cryptocurrencies that are only used by local investors. When these exchanges are closed, the liquidity for exchanging these coins disappears.
Cho Yeon-haeng, President of the Korea Finance Consumer Federation, said:
Huge investor losses are expected as trading suspended and assets frozen on many small exchanges as customer protection is unlikely to be the priority of exchanges facing an imminent closure.
International exchanges are also affected by the measure and must register with the FSC. The institution has told exchanges that it will have to notify users of this on September 17 before they close their doors. The move will further centralize cryptocurrency services in the country, with Upbit, Bithumb, Korbit, and Coinone, the largest exchanges, likely from migrating customers to approved platforms.
What do you think of the avalanche of closing services in South Korea in the coming weeks? Let us know in the comments section below.
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