More South Korean crypto exchanges are almost certain to fold in the months ahead, regulators and industry insiders have claimed, with just five months left before some of the toughest policing measures in the world come into force.
Per Fn News, regulatory sources familiar with the matter claim that “at least 10 exchanges” are on the verge of closure and that their “survival cannot be guaranteed” after failing to meet real-name banking requirements.
After the country’s first piece of crypto-specific legislation promulgated last month, exchanges now have a grace period of until September 24 to obtain banking contracts, put anti-money laundering (AML) protocols into place, gain information security management system (ISMS) management credentials and prepare documentation proving they have an adequate human resource network in place. Order book sharing with international partners may also become impossible. Those who fail to meet all the requirements must close, or face criminal prosecution and possible jail time.
A number of exchanges – including big-name trading platforms like Binance and OKEx have already given up. OKEx Korea will cease trading on April 7. Joining their number is the latest casualty, Allbit, a decentralized exchange launched in 2018. The latter’s operator Ozys was quoted as stating that the new regulations would make it impossible to continue doing business.
The regulatory body that has been charged with policing exchanges, the Financial Intelligence Unit (FIU), repeated warnings of closures ahead, stating that there was a “possibility that some existing [crypto] business operators may close their business without reporting” the fact to their clients. The FIU urged investors to transfer their funds away from such platforms if they were concerned about possible closures.
And the same media outlet quoted a domestic AML solutions provider as stating that banks were being conservative and “defensive” with their offers of real-name banking services to exchange clients – despite a massive rise in new account creation at the neobank K-Bank, which has recently partnered with the market-leading Upbit platform.
BNK Busan Bank has also indicated that it is keen on working with crypto exchanges. But this development may only benefit a small number of affluent exchange players who hope to join the “big four” exchanges, the only trading platforms that currently meet all the new requirements – namely Upbit, Bithumb, Coinone and Korbit.
A select number of such players, such as GOPAX, Hanbitco, and Cashierest, have all already obtained ISMS certification and are now racing to find banking solutions before time runs out.
But for some investors, it may already be too late, with reports last month of angry investors turning up at crypto exchange offices to demand their crypto, only to find doors locked and lights turned off. Some say that they have been unsuccessful with requests to withdraw funds dating back to January.