South Korea: Foreign Exchanges Limit Transactions Following Strict Crypto Regulations

Regulators around the world are cautious about the rise of cryptocurrencies. South Korean authorities are not an exception.

The Governor of Bank of Korea, Lee Ju-Yeol, stated that Bitcoin “has no intrinsic value.” He also said that he did not understand why its value is so high.

Taking a Step Back

Foreign crypto exchange organizations may decide to distance themselves from South Korea due to heightened regulations. Us-based crypto-exchange service Bitfront suspended payments from Korean credit cards. It also halted provisions of any Korean-language service effective 14 September. 

Earlier on, Binance also ceased Korean currency payment options and trading pairs. 

The government roots its worries about crypto to ‘protecting consumers’ and money laundering. Yet, it seems the mass adoption of crypto with its high trading volume worries the regulators. 

Four major exchanges control the nation’s trading activities: Upbit, Coinone, Korbit, and Bithumb. 

More Complex than it Seems

Some of you may think it is easy to register and proceed with your activities, but it is not as easy. In theory, it is possible, but in practice, it is implausible. 

S.Korean financial regulators continue to push banks to provide real-name accounts with tighter guidelines to help prevent money laundering and illicit activities. The regulators urge crypto exchanges to follow the guidelines by 25 September. 

One interesting legislation is the “Act on Reporting and Using Specified Financial Transaction Information.”

This rule pushes all exchanges in the S. Korean market to register with the FTRA before 24 September. The exchanges should also disclose their plan on risk management. 

The FTRA came into the light in March 2020, but it only became effective in March 2021. The FTRA watches over the cryptocurrency market in the region. It has helped at times, but it also impedes the growth of the crypto sector in the country.

S.Korea’s Tough Regulations 

Starting next year, South Korea plans to impose a 20% capital gains tax on all cryptocurrency transactions. Requests to delay this plan have fallen on deaf ears. 

Many analysts predict that the few Korean crypto exchanges, about 100, are at risk of shutting down. This is because they are unlikely to fulfill these stricter regulations. Nonetheless, Korean investors continue to view digital currencies as a profitable investment option.

The effect could be monopolization by South Korea’s largest exchanges. South Korea may not be planning to sanction cryptocurrencies. But, its regulatory system may favor the major incumbents, flushing out prospective exchanges.