September 28, 2021
By Anna J. Park
Korea Times from the Web
The nation’s cryptocurrency market is undergoing a major reorganization with only the top four-coin exchanges ― Upbit, Bithumb, Coinone and Korbit ― having secured partnerships with local commercial banks for the use of real-name accounts by investors.
Of the 29 coin exchanges that have completed their registration, required by a revision to the Act on Reporting and Using Specified Financial Transaction Information, only the four allow investors to buy and sell cryptocurrencies with fiat currencies, such as the Korean won.
Other coin exchanges that have failed to partner with commercial banks, including GOPAX and Huobi Korea, can now only provide coin trading services between cryptocurrencies.
Under the revision, crypto exchanges and related companies had to register their businesses by Sept. 24 in order to get a government license. Out of the 42 registered companies, 29 are coin exchanges while the remaining 13 are crypto-wallet or trustee businesses.
According to the Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC), which supervises the digital coin market, the registered 29 exchanges cover 99.9 percent of the country’s cryptocurrency trading.
Dozens of other unregistered exchanges that failed to meet the deadline, will now have to close down. If they continue operations with their unregistered status, operators could face penalties including jail time.
Market watchers view that once coin exchanges halt their Korean won-trading services, they are expected to see a sharp decline in revenue. With market competition receding in the market, some raised concerns that investor protection and consumer innovation could also deteriorate under an oligopoly with only a few exchanges exerting influence on the market.
To combat this, digital coin market insiders have been calling for the complete legalization of the cryptocurrency sector in order to heighten consumer protection and raise market competition. Four bills have been proposed at the National Assembly, aiming to regulate the cryptocurrency market, and more are expected over the next few months.
With discussions of the bills still pending at the Assembly, the reality of the cryptocurrency sector is one of chaos and confusion amid the high level of uncertainty.
Even the big four digital coin exchanges with partnerships could see their partner banks reevaluate whether to extend their arrangement once the end of current deals approaches.
The so-called “travel rule” suggested by the Financial Action Taskforce (FATF) ― an intergovernmental organization founded in 1989 to combat international money laundering ― is also expected to be another “game-changer” in the cryptocurrency market.
The FATF recommended the implementation of the travel rule on cryptocurrency transactions to tackle criminal activity including the financing of terrorist organizations. In order to do this, it would need to have an integrated system to collect trading information on both sides of coin exchanges and crypto wallet operators. So far most countries haven’t yet been compliant with the travel rule due to technical hurdles, yet the country’s Act on Reporting and Using Specified Financial Transaction Information stipulates each exchange is required to abide by it from next March.
Some local commercial banks that partnered with the four exchanges are concerned as to whether the latter will be able to implement the rule without any risk to them.
While three of the four ― Bithumb, Coinone and Korbit ― launched a joint venture last month to respond to the travel rule requirement, it remains to be seen whether the uncertainties surrounding the cryptocurrency market can be resolved.
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