Reuters
- Eun Sung-soo, chair of South Korea's Financial Services Commission, said all crypto exchanges could be shut down, according to a report in the Korea Times.
- Under new regulation, crypto exchanges must register with the commission but none have applied yet, he said.
- The new rules are part of a wider push to regulate crypto trading more tightly in South Korea.
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Eun Sung-soo, the chair of South Korea's Financial Services Commission, said that all crypto exchanges in the country, over 200, could be shut down in September. He made the remarks at a meeting of the National Assembly's Political Affairs Committee last week, the Korea Times reported.
South Korea amended its anti-money laundering and financial reporting laws to include cryptocurrencies last year, in an effort to stop illicit activities being funded with digital assets. The government has also said cryptocurrencies are more speculative and riskier than other asset classes.
Under the new regulations, crypto exchanges must register as virtual asset service providers and fulfil a variety of other criteria. These include implementing anti-money laundering strategies, having partnerships with local banks, becoming information security management certified and tracking real names of customers.
Eun said despite the application window opening on March 25th when the new regulations came into force, no crypto exchanges have submitted theirs yet. Crypto exchanges need to be approved by September 24th.
The new laws have put the South Korean crypto industry under pressure. At the moment, only the four biggest exchanges have partnerships with local banks and the other criteria, especially obtaining real names of customers, are difficult to fulfil. Additionally, they infringe on factors that make crypto investing appealing to traders in the first place, like anonymity.
South Korea's crypto market is growing consistently and has surged in popularity over recent years.
One of its main characteristics is the so-called "kimchi premium" - the gap between bitcoin traded in dollars and that traded in Korean won. It is around 6.3% right now, down from a record of 20.6% struck last week, according to data from Korean analytics site CryptoQuant. The larger the premium, the greater the buying activity on the Korean crypto market. This spread narrowed to around 2% last week, as domestic investors fretted about a potential regulatory crackdown.
Some investors try to use the premium to make a profit through arbitrage. In the process, investors trade the price difference - they buy and sell an asset that may be quoted in different currencies, or on different exchanges, at the same time, hoping to pocket the price difference.
Should the South Korean crypto market be effectively shut down by the new regulations, the kimchi premium could cease to exist.