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South Korean cryptocurrency traders are facing losses of more than 3 trillion won.
The Financial Services Commission, South Korea’s financial regulator, has set a deadline for foreign and local exchanges to register as legal trading platforms on September 24th in an effort to strengthen oversight of the country’s exuberant crypto sector.
Most local exchanges are struggling to meet the conditions, however, as almost 40 of South Korea’s estimated 60 crypto operators are set to close, according to industry insiders and regulators.
South Korea’s crypto trading is dominated by four major exchanges – Upbit, Bithumb, Korbit, and Coinone – which account for more than 90 percent of the country’s total trading volume.
The bulk closure of smaller exchanges could also eliminate 42 so-called kimchi coins, alternative digital currencies listed on local exchanges and mainly traded in Korean won at Korea University, according to estimates by Kim Hyoung-joong, professor and head of the Cryptocurrency Research Center .
Industry data showed that digital coins other than Bitcoin accounted for around 90 percent of South Korean crypto trade, underscoring the highly speculative nature of the market.
“A situation similar to a bank run is expected shortly before the cut-off date, as investors cannot withdraw their holdings of ‘alt-coins’ that are only listed on small exchanges,” said Lee Chul-yi, head of Foblgate, a medium-sized exchange. “You will suddenly be poor. I wonder if the regulators can handle the side effects. “
The FSC has instructed exchanges that do not meet the regulatory requirements to notify their customers of a possible closure by Friday, September 17.
In order to be licensed as a legal trading platform, South Korean crypto exchanges must work with local banks to open real name bank accounts for customers. But local lenders have opposed this because they feared they could face money laundering and other financial crimes.
About 20 exchanges have met some of the regulatory requirements by setting up security systems for personal data and are allowed to offer crypto-to-crypto trading services. However, industry observers said that given the limited size of their business, operators are still struggling to survive.
“Huge investor losses are expected as trading halts and assets frozen on many small exchanges as customer protection is unlikely to be the priority of those exchanges that are about to close,” said Cho Yeon-haeng, president of Korea Finance Consumer Federation.
The regulations will also affect global exchanges that offer won trading. The FSC has sent a notice to 27 overseas crypto exchanges conducting business for Korean traders.
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Binance, the world’s largest crypto exchange, shut down its won-to-crypto trading service last month to “proactively comply with local regulations,” the first such move by a major overseas operator.
The Korean won is the third most widely used currency for Bitcoin trading after the dollar and the euro, and accounts for around 5 percent of global trade, according to Coinhills.
Regulators hope the overhaul will dampen the crypto frenzy in South Korea. Many young South Koreans – facing high unemployment and rising property prices – have remained avid digital asset buyers despite the volatility of currencies.
Bitcoin has seen a roller coaster ride this year, climbing to more than $ 60,000 in April before falling to less than $ 30,000 in June.
Since then, it has rebounded to around $ 46,000, thanks to risky bets from developing countries, including El Salvador’s groundbreaking introduction of digital currency as legal tender.
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source https://www.bisayanews.com/2021/09/13/south-korea-crypto-crackdown-to-wipe-2-6bn-from-kimchi-coins/
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