A number of smaller South Korean crypto exchanges have declared their impending closure, abandoning their efforts to fulfill a rapidly approaching regulatory deadline that threatens to collapse the country’s crypto trading platform business.
Darlbit, CPAX, and Daybit are the most recent exchanges to declare that they will be closing their doors in the coming weeks, according to Joongang Ilbo.
The impending shutdown of CPAX, in particular, may raise eyebrows, given the platform has acted as the exchange arm of key blockchain operator Coinplug. The latter is a key government collaborator on a variety of contact-free technology solutions.
CPAX verified the news on its website, noting that the September 1 “suspension of withdrawal services” was “not a temporary suspension,” but was being carried out “in conjunction with the cessation of our exchange services.”
Darlbit and Daybit both mentioned “the government’s enforcement” of the new measures as well as “regulatory changes” in their respective releases.
Bitsonic, another exchange, did not announce its closure, but did confess on its Telegram channel that it was stopping its services for the first three months. It did, however, write that it would be “difficult to restart normal operations” following the suspension due to “unavoidable” concerns both “inside and outside the company.”
By the 24th of next month, all crypto exchanges in the country must obtain information security management system (ISMS) certification, form partnerships with real name-authenticated commercial banking partners, implement anti-money laundering protocols, and demonstrate their management credentials to financial regulators – among other things.
Noncompliance may result in fines and even incarceration.
The regulations have already resulted in the closure of a number of platforms, with many fully knowing that they lack the financial resources required to meet the standards. Some detractors of the regulations, including prominent politicians, have predicted a “shutdown crisis.”
Most people expect at least the “big four” exchanges — Korbit, Bithumb, Upbit, and Coinone – to be approved, though none of them appear to have received the critical banking contracts they will need to continue operating after September 24.
With foreign exchange trading also facing a rough future, the situation is now dismal for crypto traders in South Korea — a country where crypto investment and trading volumes have skyrocketed this year.
Smaller exchanges have also been rocked by an audit of banking procedures, which revealed at least 14 “fake” accounts used by minor trading platforms last week. All 14 cases have been turned over to police and prosecutors.