Report said that the South Korean Financial Services Commission (FSC) announced that the government is planning to propose and enact measures aimed at maintaining strict oversight over the nation’s crypto exchange market.
It has been reported that this move comes as virtual asset service providers (VASPs) have been given until September to register with the appropriate state authorities. Crypto exchanges in South Korea were already under pressure even before this new set of stricter regulatory policies.
However, the requirement for real-name trading accounts has seen smaller- and medium-sized exchanges scramble to secure licenses from commercial banks to no avail. Recently, reports have emerged of another policy move from South Korean authorities that could have far-reaching ramifications, even for the “Big Four” crypto exchanges in the country, such as Bithumb, Coinone, Korbit, and Upbit.
As previously reported, the FSC is planning to ban cross-trading on crypto exchanges in the country as part of a raft of stricter regulatory measures for trading platforms. Cross-trading is a method used by trading desks to offset buy and sell orders for the same asset without recording the transactions on their order book.
While illegal in many countries, cross-trading is in some ways a necessary practice for crypto exchanges in South Korea. For one, crypto trading in the country is denominated in Korean won, but fees are collected in cryptocurrencies. Cross trading offers a solution for South Korean crypto exchanges, allowing them to convert trading fees to Korean won by performing the conversion right on their platform. With the FSC banning the practice, these exchanges may now have a hard time realizing the significant revenue stream that comes from collecting trading fees.
It has also been reported that South Korean crypto exchanges charge 0.05% on average as trading fees. In the first quarter of 2021, Upbit raked in almost $9 million in fees daily from a 24-hour turnover of about $17.9 billion. Indeed, the sizable surge in South Korea’s crypto trading volume in 2021 has meant greater fee revenue for platforms.
Thus, any new crypto trading-related venture in South Korea must be registered with FSC’s Financial Intelligence Unit and adhere to strict Anti-Money Laundering (AML) laws.