The report as of September 23 revealed that six of the crypto exchanges in South Korea made progress on the requirements for compliance set out by the Korean Financial Intelligence Unit. These exchanges include Flat Thai X, Prabang, OK-BIT, Gdac, Five. However, 18 more are expected to file their documents by Friday, September 24.
If all these exchanges completed filed the necessary documents, the total number of the registered exchanges would rise to 28, and this figure includes the Big Four – Korbit, Coinone, Bithumb, and Upbit – who are controlling over 90% of the total crypto trading volume in the country.
The Big Four have received certification from the Korean Internet and Security Agency and have secured contracts with banks for the verification of user account names. This means that they are now eligible for KFIU submission.
The Most Affected Exchanges Are the Under-Resourced
In a bid to reduce the risks of money laundering attached to the crypto movement, certain security infrastructure was required from the crypto exchanges in South Korea by KISA – Korea Internet and Security Agency. Additionally, there is a need to secure partnerships with the banks for the Financial Services Commission to approve. This means that the banks will bear the risks if funds were ever used for illicit financial acts, and that implies that banks are well-reserved against exchanges that don’t have enough resources to implement the anti-money laundering systems as required by KISA.
Experts in the financial industry have estimated that which move will push about 50 exchanges out of business or be forced to have their service offering reduced for not meeting the requirements of the agency.
Gdac, Huobi Korea, and Gopax were unable to secure partnerships with any bank as required and will have to shut down by 11:59 pm, September 24, 2021. Problematic and Probit have ceased operations already. The Financial Services Commission has earlier urged investors in the uncomplying exchanges to withdraw their assets before the deadline given as their assets will be irretrievable as the exchange is shutting down.
Potential Crypto Monopoly in South Korea Looming
According to a Democratic Party Member, these ensuing events in the country will cause a lopsided monopoly in the crypto market as an exchange can choose to hype transaction fees, list, or delist assets at will.
The Head Sales at Eqonex, Justin d’Anethan, believes that the increase in exchanges overseas and also in the decentralized exchanges circle means more traders will be trooping into the crypto space, but regulations will legitimize the crypto space and clarify the practices in the industry.