With South Korean regulators set to shut down local cryptocurrency exchanges that fail to meet up the requirements before the deadline later in September, buyers within the nation might expertise losses price over $2.5 billion.
Clampdown on Crypto Exchanges May Incur Large Investor Losses
The Financial Services Commission (FSC) mandated all cryptocurrency exchanges operating in the country, along with foreign exchanges using the Korean won to utilize real-name accounts before the September 24 deadline. Lower than two weeks earlier than the regulator takes motion, lower than half of native crypto companies are but to satisfy the stringent necessities.
According to the Financial Times, industry insiders note that only 20 out of 60 South Korean exchanges met some of the conditions by creating security systems for personal information. Nevertheless, the exchanges would nonetheless wrestle to outlive, because of the restricted scale of their operations.
With only 20 local exchanges that seem to have made effort to fulfill part of the FSC’s requirements, about 40 cryptocurrency operators could shut down later in September. This motion might additionally erase 42 “kimchi” crypt tokens listed on affected exchanges.
Consequently, investors using these smaller exchanges may also suffer losses of more than three trillion won (over $2.5 billion). Based on the president of the Korea Finance Client Federation, Cho Yeon-haeng:
“Huge investor losses are expected with trading suspended and assets frozen at many small exchanges as customer protection will not likely be the priority of those exchanges facing an imminent closure.”
Additionally, Lee Chul-yi, who heads a mid-sized crypto firm referred to as Foblgate, said that
“A state of affairs just like a financial institution run is anticipated close to the deadline as buyers can’t money out of their holdings of ‘alt-coins’ listed solely on small exchanges. They will find themselves suddenly poor. I wonder if regulators can handle the side-effects.”
Affected Crypto Exchanges to Give Clients one Week Discover Earlier than Deadline
In an effort to use real-name accounts for his or her clients, South Korean cryptocurrency exchanges should companion with banks within the nation. However, these local banks are reluctant to partner with these exchanges, citing exposure to money laundering and other related crimes.
Some international exchanges have additionally reacted to the regulatory insurance policies set by South Korea, by stopping Korean-won buying and selling pairs or halting cost from Korean bank cards.
Meanwhile, the FSC stated that crypto exchanges that do not meet the requirements should give users prior notice of a possible closure by September 17, one week before the deadline.
