With about 50 days to go before the deadline for cryptocurrency exchanges to register with South Korea’s financial authorities, some of the 60 or so small and medium-sized exchanges that have been unable to obtain real-name bank accounts are closing down, reports the Korean language daily Hankook Ilbo.
Accordingly, concern is mounting that investors will take a beating if smaller exchanges shut down all at once.
The exchange CPDAX recently announced it would terminate its cryptocurrency custodial and real time withdrawal services from September 1. Another exchange, Darlbit, stopped service from July 15, while Daybit went belly-up in June.
Bitsonic, meanwhile, announced a suspension that looks more like a going-out-of-business notice, said the Hankook Ilbo. And CHAIN-X has also practically closed, suspending deposits in Korean won. CHAIN-X also delisted 57 cryptocurrencies at 11 p.m. of July 16, but waited 16 minutes before telling anyway what it had done.
The Korea Herald, meanwhile, reports that South Korea’s top financial watchdog will shut down about 11 exchanges for illegal activity:
“According to the sources, the 11 exchanges that have used fraudulent collective accounts will most likely close business as Financial Services Commission plans to stop their transaction and notify illegal activities to the prosecution and the police.
The names of the exchanges were not disclosed yet, however, it will be impossible for them to get approval for operation by FSC, industry sources said.”
As we noted here before, cryptocurrency exchanges need to register with the Korea Financial Intelligence Unit (FIU) by Sept. 24.
To register with the FIU, exchanges that allow locals to deposit and withdraw legal tender — i.e., the Korean won — must receive real-name accounts from banks and get Information Security Management System (ISMS) certification.
Of the roughly 60 domestic cryptocurrency exchanges, only 20 have received ISMS certification, while only four — that’s right, four (Upbit, Bithumb, Coinone and Korbit) — have secured real-name bank accounts.
This is why main opposition party lawmaker Jo Myunghee plans to propose next week an amendment to the Financial Transactions Reporting Act that would prevent the FIU from turning down an exchange’s registration request for failure to obtain a real-name bank account and extend the registration grace period for three months.
Jo cited concerns that if exchanges were to shut down all at once, investors could suffer massive losses.
South Korea’s financial authorities, however, currently oppose extending the deadline.
