Fear appears to be taking hold of crypto investors in South Korea, with just over a month before key regulations come into force, exchanges seemingly woefully underprepared for a raft of new policing measures – and the majority of registered crypto companies’ websites offline or inaccessible.
As reported earlier this week, zero out of over 30 exchanges that were audited by the regulatory Financial Services Commission (FSC) passed their due diligence audits, with just over four weeks until the September 24 deadline for exchanges to register with the FSC’s Financial Intelligence Unit.
The registration process involves gaining information security management system (ISMS) certification, establishing anti-money laundering (AML) protocols, passing security checks and establishing banking contracts with domestic financial institutions – feats that no trading platforms have yet managed to accomplish.
Speaking to Cryptonews.com, a 40-year-old crypto investor who asked only to be identified by her surname, Lee, explained:
“It’s starting to become very nerve-wracking. The government knows that exchanges are holding a lot of citizens’ funds. I simply cannot believe they would allow a situation whereby they effectively force everyone to liquidate their crypto and withdraw. There really would be an outcry.”
Song (54, first name also withheld), told Cryptonews.com,
“I honestly want to just transfer all my coins to an overseas exchange at this point, just in case I’m blocked from trading. This has become my livelihood. But the FSC has said the same rules will apply to overseas exchanges, too, so I’m not sure where to turn.”
Speaking on a TV news report from TVChosun, an unnamed crypto investor said:
“If several investors suffer damages due to a lack of preparation, that will be a problem. I hope that the government postpones the deadline.”
A source close to a number of major crypto exchanges told Cryptonews.com that platforms were “pulling out all the stops” in a bid to be ready on time, and that the platforms were working hard to address all the points that the auditing teams identified in a bid to beat the clock.
But even bigger problems could well be brewing in the form of crypto companies whose owners appear to have abandoned ship. Chosun reported that a major new study from the Korea Federation of Banks (KFB) found that the websites of 70% of all South Korean crypto companies have gone offline or become inaccessible.
The KFB found that there were over 300 domestic crypto-related firms ostensibly operating in South Korea, but discovered that only three in 10 had functioning websites, a sign that a number of projects may have been abandoned.
Worryingly, perhaps, this number included a large number of exchanges – 79 – sparking further fears that some exchanges are already planning to fold en masse in September, with “planned” eleventh-hour bankruptcies a distinct possibility.
Some politicians have warned of an impending “shutdown crisis”, and a number of MPs have launched bids to delay the deadline by a further three months or more.
Chosun wrote that if the status quo is unchanged, a “heap of closures” is to be expected in September.
The media outlet also quoted an unnamed financial regulatory official as stating:
“There is a high possibility that exchanges that fail to register will close without any notice or [that their executives] will seek to embezzle their clients’ funds.”
– All of South Korea’s Crypto Exchanges Fail their Regulatory Audits
– Smaller South Korean Crypto Exchanges Begin to Shutdown, Suspend Services
– Signs of a Crypto Regulatory Climbdown from South Korea’s Ruling Party
– S Korean Regulator to Force Crypto Overseas Exchanges to Abide by its Rules
– South Korea’s Ruling Party Hints at Increased Crypto Leniency
– Korbit Reopens Offline Customer Service Center in Seoul’s Busy Gangnam