South Korean Regulators Scrutinize Exchange Tokens
Recently, South Korean authorities have increased regulatory oversight on the country’s cryptocurrency, but it seems that they are also extending that scrutiny to include exchange tokens.
Most cryptocurrency exchanges issue tokens and reward the holders of such tokens in various ways. Such rewards include regular token burns or lesser trading fees than non-token holders.
New Regulation for South Korean Exchanges
A Korean news outlet, Arirang, reports today that crypto exchanges in the country are now forbidden from handling any assets or coins they’ve issued. The new regulation, which becomes effective by June 26, 2021, also affects coins or assets issued by distant relatives, family members, or even spouses.
The authorities will fine or suspend any exchange operations that don’t adhere to this law; fines can rise to about $90,000. The compliance with this new regulation is likely the reason behind South Korea’s financial intelligence unit (FIU) notice to the 33 crypto trading platforms of an impending field consultation within the next three months.
Top Korean Exchange Delists Coins and Releases Warnings
This new law might explain why Upbit (a top Korean exchange) delisted some coins and released strong investment warnings regarding another 26 assets. All of which represent about 14% of the coins on the exchange’s listing.
Upbit also makes it known that it will no longer accept inbound deposits for the 26 coins listed in the warning. It also revealed it might delist them upon a review of these assets. The review will be completed, and a final decision will be taken by tomorrow, June 18.
South Korea has chosen to increase its oversight on its cryptocurrency market by asking exchanges and trading platforms to provide Information Security Management System (ISMS) certificates, which seems like the equivalent of an operating license.
While 21 exchanges have provided these certificates, 12 of them have delisted tokens or released warnings like Upbit. It is a proven fact that there are hardly any exchange tokens that own a proprietary blockchain.
Hence, the definition of what it means to “handle” exchange-issued tokens will be discussed from a legal perspective in the following days and weeks, even as South Korea’s crypto market cleansing continues.
FSC Plans to Ban Cross Trading
South Korea’s financial services commission (FSC) plans to forbid cross-trading on cross exchanges as it enforces greater control measures on the digital currency industry. Cross-trading is a technique where trade platforms execute buy and sell orders for a single asset without entering such trades in their order book.
It was permitted in South Korea (until now), mainly because the Korean won is the domiciled currency for crypto trading even though trade fees are paid in digital currencies. However, it was illegal in several other countries.
Keep in mind that the average trade fee on South Korean crypto exchanges is about 0.06%. Hence, top exchanges like Upbit earn about $8.99 million every 24 hours from these fees since it has a daily turnover of about $18 billion.
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