- South Korea’s new crypto regulations have significantly impacted major exchanges.
- These regulations are designed to enhance the security and transparency of the crypto market.
- A notable drop in trading volumes has been observed across South Korean exchanges.
Discover the immediate impact of South Korea’s new crypto regulations on major exchanges like Upbit and Bithumb. Insightful details and key takeaways inside.
Implementation of New Crypto Regulations in South Korea
On July 19, 2024, South Korea enacted the Act on the Protection of Virtual Asset Users, aiming to establish a secure environment for cryptocurrency users and enhance market order. This new regulatory measure has had an immediate and profound impact on trading volumes across major South Korean crypto exchanges.
Impact on Major Crypto Exchanges
The regulation has notably affected leading exchanges like Upbit, Bithumb, Coinone, and Korbit. Upbit, the largest exchange in South Korea, saw its trading volume decrease by 30%, dropping to $1.50 billion. Bithumb experienced a 24.7% reduction, with volumes reaching $425.22 million. Coinone endured the most significant dip, with volumes plummeting by 38.4% to $23.36 million. Korbit also faced a 38.4% decrease, with trading volumes falling to $5.07 million. These declines highlight the market’s sensitivity to regulatory changes.
Overview of the New Regulations
The Act on the Protection of Virtual Asset Users introduces comprehensive measures to address gaps in the previous regulatory framework. These include:
- Protection of user assets by ensuring deposits are held in secure custody and separated from the service providers’ assets.
- Mandating virtual asset service providers (VASPs) to maintain insurance or reserve funds against liabilities such as hacking or network failures.
- Implementing surveillance mechanisms to detect and report suspicious transactions. Severe penalties are imposed on those involved in unfair trading practices.
- Empowering the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) to supervise, inspect, and sanction VASPs.
In preparation for these regulations, VASPs and financial authorities have closely collaborated to ensure compliance, including the creation of detailed subordinate statutes and best practice guidelines aimed at fostering self-regulation within the industry.
Conclusion
South Korea’s new crypto regulations have sent ripples across the cryptocurrency market, causing significant declines in trading volumes on major exchanges. While the immediate impact has been considerable, the long-term benefits of a more secure and transparent crypto trading environment could help stabilize and legitimize the market. These changes underscore the importance of regulatory frameworks in shaping the future of cryptocurrency trading.
