Regulator accused of stifling nascent blockchain industry
The nation's cryptocurrency market is facing drastic changes, as only four exchanges ― Upbit, Bithumb, Coinone and Korbit ― were able to secure real-name accounts in partnership with local banks by the Sept. 24 deadline. Securing real-name accounts is an obligation for traders to buy and sell cryptocurrencies in exchange for the Korean won under the Act on Reporting and Using Specified Financial Transaction Information, which went into effect Saturday.
Twenty-five other virtual currency exchanges that failed to partner with banks, including Huobi Korea, are now able to provide only digital coin-trading services between cryptocurrencies. The remaining 13 are crypto-wallet businesses. After the deadline, dozens of exchanges failing to meet the new qualifications are facing closure as their businesses have become illegal under the new law.
However, the shutdown of the small exchanges is expected to have a minor impact on the market as their trading volume accounts for less than 0.1 percent of total transactions. Nonetheless, it's necessary for the financial authorities to do their best to protect investors because of concerns that some exchanges might not return their deposits.
The Financial Services Commission took measures to let unregistered exchanges ensure the withdrawal of money for at least 30 days after they announce the closure of operations. But these measures are not compulsory, prompting concerns that some of them might close down without due action, or unilaterally block withdrawals. Also, some exchanges might never pay investors back.
With four exchanges now dominating the local cryptocurrency trading market, some are voicing concerns about the lack of competition. As of the end of August, aggregate investor deposits at exchanges with security certificates amounted to 62 trillion won ($52.5 billion), 96 percent of which was with the four exchanges. Other exchanges can still resume won-based trading by partnering with banks later, but this is highly unlikely. So the oligopoly of the four exchanges will deepen further amid increasing criticism that the financial regulator is stifling the blockchain industry, which is still in its nascent stage.
The nation's cryptocurrency market is facing drastic changes, as only four exchanges ― Upbit, Bithumb, Coinone and Korbit ― were able to secure real-name accounts in partnership with local banks by the Sept. 24 deadline. Securing real-name accounts is an obligation for traders to buy and sell cryptocurrencies in exchange for the Korean won under the Act on Reporting and Using Specified Financial Transaction Information, which went into effect Saturday.
Twenty-five other virtual currency exchanges that failed to partner with banks, including Huobi Korea, are now able to provide only digital coin-trading services between cryptocurrencies. The remaining 13 are crypto-wallet businesses. After the deadline, dozens of exchanges failing to meet the new qualifications are facing closure as their businesses have become illegal under the new law.
However, the shutdown of the small exchanges is expected to have a minor impact on the market as their trading volume accounts for less than 0.1 percent of total transactions. Nonetheless, it's necessary for the financial authorities to do their best to protect investors because of concerns that some exchanges might not return their deposits.
The Financial Services Commission took measures to let unregistered exchanges ensure the withdrawal of money for at least 30 days after they announce the closure of operations. But these measures are not compulsory, prompting concerns that some of them might close down without due action, or unilaterally block withdrawals. Also, some exchanges might never pay investors back.
With four exchanges now dominating the local cryptocurrency trading market, some are voicing concerns about the lack of competition. As of the end of August, aggregate investor deposits at exchanges with security certificates amounted to 62 trillion won ($52.5 billion), 96 percent of which was with the four exchanges. Other exchanges can still resume won-based trading by partnering with banks later, but this is highly unlikely. So the oligopoly of the four exchanges will deepen further amid increasing criticism that the financial regulator is stifling the blockchain industry, which is still in its nascent stage.
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