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Cryptocurrencies

Overseas crypto exchanges end Korean services ahead of rule tightening

Most opting to close Korean-language services rather than comply with stricter local regulations

By Aug 17, 2021 (Gmt+09:00)

Bithumb, one of South Korea's largest cryptocurrency exchanges
Bithumb, one of South Korea's largest cryptocurrency exchanges

Overseas cryptocurrency exchanges are ending their Korean services, including language support as well as trading and payments in Korean won, as South Korea is set to enforce tighter regulations on virtual asset transactions.

According to industry sources on Tuesday, Bitfront, a US-based cryptocurrency exchange run by Naver Corp.'s Japanese affiliate Line Corp., has decided to phase out Korean services.

It will stop Korean-language marketing activity via social media platforms such as Facebook, Telegram and Line for its Korean clients this month. Bitfront will also discontinue payments using Korean credit cards and other Korean services from Sept. 14.

Last week, Binance, the world’s largest cryptocurrency exchange by trading volume, announced that it is ending Korean-language support, including pair trading and payments in the Korean currency as of Aug. 13. It also said it will not operate communication channels such as Telegram in Korean for its services.

FTX Trading Ltd., another foreign crypto bourse, said last Wednesday it removed Korean from its available languages for global clients.

Koreans have been major clients of crypto exchanges abroad as there they could engage in riskier trading than allowed on domestic exchanges. As of the end of June, about 400,000 Koreans were registered with Binance as monthly active users.

The moves by overseas crypto exchanges to end Korean services come as Korea’s financial regulators are set to tighten rules to prevent criminal activity and protect investors in virtual asset trading.

NEW RULES TAKE EFFECT ON SEPT. 25

By Sept. 24, virtual asset trading exchanges must be certified by the state in terms of risk management and partner with a domestic bank to ensure real-name client accounts if they want to continue operations. The tightened regulations will take effect from Sept. 25.

To do so, crypto exchanges must register with the Korea Financial Intelligence Unit, a government body set up to prevent money laundering and terrorist financing.

Bitcoin is one of the world's most actively traded virtual assets.
Bitcoin is one of the world's most actively traded virtual assets.

The Financial Services Commission (FSC), the regulator, said any cryptocurrency exchange operator in the country that fails to meet the requirements will be deemed to be operating illegally and face up to five years in prison or a fine of 50 million won ($43,500). In the worst-case scenario, they will end up being closed down completely.

Overseas crypto exchanges that serve Koreans with won-currency settlements are also subject to the new regulations to continue dealings with Korean investors.

The Korean authorities have identified 27 crypto exchanges based overseas that allow virtual asset trading in Korean, and requested them to take necessary measures by Sept. 24 to continue dealings with Korean clients.

But none of them have so far obtained the state certification to continue offering services to Korean investors, according to the FSC.

South Korea accounts for about 10% of global cryptocurrency transactions, according to industry data. The intensity of trading has seen cryptocurrencies such as bitcoin trade at a much higher rate, called the Kimchi Premium, in Korea.

Binance and other global crypto exchanges face trade restrictions by financial regulators across the globe, including those in the US, UK, China and Japan.

Write to Hyun-Woo Lim at tardis@hankyung.com

In-Soo Nam edited this article.

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