Main Takeaways
- Over half of Korean exchanges effectively closed after registration deadline
- 29 exchanges applied for registration, but 25 registered as coin markets.
- Only the Big Four will continue to support Korean won transactions
- Korean financial authorities predict little chaos, but investors should expect — and maybe even welcome — a major structural adjustment in the crypto exchange space.
Korea’s big reporting deadline for cryptocurrency exchanges came and went last week.
A structural adjustment in the cryptocurrency space is now underway as a result.
Here’s how things currently stand.
Over half of Korean exchanges close
The Financial Services Commission’s Financial Intelligence Unit said Friday that it had received reporting documents from 42 virtual asset providers.
Some 29 of these were exchanges, while 13 were from other companies.
While all 29 of the exchanges have secured ISMS certification, only the Big Four — UPbit, Bithumb, Coinone and Korbit — secured real-name bank accounts.
What that means is that from now on, only those four exchanges will let you use Korean won to purchase cryptocurrency. Assuming the government approves their registrations, that is.
The other 25 have applied to register as “coin markets.” They will let you purchase cryptocurrencies with other cryptocurrencies, but prohibit purchases in Korean won.
Prior to the deadline, the Korean government determined there were 63 cryptocurrency exchanges operating in Korea. The remaining 34 who did not apply for registration have effectively been closed.
The government will now spend about three months screening the applications. So far, it has approved the application of just one application, namely, UPbit.
No chaos expected, but…
The Financial Services Commission believes the mass extinction of over half Korea’s cryptocurrency exchanges will cause very little chaos because the 29 exchanges that did apply account for 99.9% of the Korean market.
Indeed, for investors, there’s a lot of upside.
The head of D.CODE Law Group told the Korean business daily Hankyung that investor risk will decrease as users migrate to the relatively stable Big Four. The paper also said investors should welcome the death of small-scale exchanges, many of which excessively engaged in “shit coins” and dubious behavior.
On the other hand, the Big Four seems to have solidified their stranglehold on the Korean market, which isn’t great for startups looking to break into the space. It could also hurt consumers with the big exchanges facing even less competition in terms of fees and commissions.
Moreover, many of the medium-sized exchanges-turned-coin markets may soon close as users flock to the Big Four. Tightening government regulation — see the Travel Rule — may drive them from the market, too.
The Hankyung also notes that with the deadline behind them, the surviving exchanges can now focus on breaking into new markets. In particular, exchanges could broaden their horizons into NFTs, DeFi and custody services.
