Upbit & Other South Korean Exchanges Suffer With New Crypto Law In Effect

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As a seasoned crypto investor with a deep understanding of the South Korean market, I have witnessed the rapid growth and evolution of exchanges like Upbit, Bithumb, Coinone, and Korbit over the years. Their user-friendly interfaces and wide range of supported cryptocurrencies made them go-to platforms for many investors, myself included.

Beginning July 19, 2024, the Virtual Asset User Protection Act took effect in South Korea. Designed to bolster security for virtual asset users and institute order within the virtual asset market, this new crypto legislation has brought about noticeable consequences. Specifically, trading volumes have seen considerable drops on prominent South Korean cryptocurrency exchanges such as Upbit.

Impact On Upbit & Other South Korean CEXs

Founded in October 2017 by Dunamu, Upbit swiftly rose to become the dominant crypto exchange in South Korea. Its success can be attributed to its intuitive user interface and extensive list of supported cryptocurrencies.

In the last 24 hours, Upbit’s trading volume decreased dramatically by 29.4%, amounting to only $1.50 billion as reported by CoinGecko. This substantial decrease highlights the market’s initial response to the recent regulatory changes.

Established in 2013, Bithumb is one of the most recognized cryptocurrency exchanges based in South Korea. It has continually been among the top 50 exchanges globally regarding trading volume and user base. However, there was a significant decrease of 24.7% in its daily trading volume, which amounted to approximately $425.22 million.

Founded in 2014, Coinone has emerged as a significant force in South Korea’s cryptocurrency scene. Its advanced trading platform and additional features such as staking and lending have made it a go-to choice for many users. However, among the major exchanges, Coinone suffered the most substantial loss with a 38.4% decrease in trading volume to approximately $23.36 million. This dramatic fall underscores the market’s heightened responsiveness to regulatory developments.

As one of the early cryptocurrency exchanges in South Korea, Korbit was established in 2013 and has played a significant role in increasing the use of digital currencies within the country. Korbit’s influence is comparable to Coinone, with a trading volume increase of 38.4% amounting to $5.07 million over the previous day.

Overview Of The New Crypto Regulation

The Act Concerning the Protection of Virtual Asset Users is designed to fill several voids in the existing regulatory structure, which predominantly centered around anti-money laundering regulations. Notable aspects of South Korea’s new crypto legislation encompass:

1. Secure Handling of User Funds: Virtual asset service providers (VASPs) are required to hold users’ deposits in trusted banks and pay out any applicable interest. Users’ virtual assets should be kept separate from the VASPs’ own assets.

VASPs (Virtual Asset Service Providers) must ensure they are protected financially against potential losses caused by cyber attacks or network disruptions. They can accomplish this either by obtaining insurance coverage or setting up a reserve fund for such unforeseen circumstances.

3. Monitoring and Reporting of Suspicious Trading Practices: The Act demands vigilance over potentially unjust business dealings. It is compulsory to promptly inform South Korea’s Financial Supervisory Service (FSS) upon detection. Individuals involved in unfair trading practices are subjected to rigorous consequences, ranging from criminal proceedings to monetary fines.

4. Oversight and Disciplinary Authority: The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have the power to monitor, examine, and impose penalties on Virtual Asset Service Providers (VASPs). They can administer corrective measures, temporarily halt operations, and levy administrative fees.

In advance of the new law’s implementation, financial regulators in South Korea have collaborated with Virtual Asset Service Providers (VASPs) to ensure they adhere to the regulations. The Financial Services Commission (FSC) has issued comprehensive guidelines, while the Financial Supervisory Service (FSS) has provided on-site consultations and a roadmap for VASPs to follow.

A pilot test was carried out to evaluate readiness, while the Digital Asset Exchange Alliance (DAXA) in collaboration with 20 virtual asset exchange service providers, formulated self-regulatory best practices.

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2024-07-21 05:35