"Korea 94" is coming? What is the real situation? What is the impact on the global crypto market?

Wu said author | Colin Wu

Editor of this issue | Colin Wu

South Korea is one of the largest single cryptocurrency markets in the world. For global cryptocurrency exchanges, South Korea may be the largest single retail market outside of Greater China. South Korea has set a September 24 deadline for exchange registration, which is nicknamed "Korea 94" by the Chinese community. What impact will it have on the market?

The source of the matter is that South Korea’s revised Specific Financial Transaction Information Reporting and Use Act requires cryptocurrency exchanges to obtain Information Security Management System (ISMS) certification by September 24 and submit reports to the Financial Intelligence Unit (FIU), a division of the Financial Services Commission (FSC).

So far, the 28 exchanges that have passed ISMS certification include Gopax, Upbit, Korbit, Coinone, Bithumb, Hanbitco, Casherst, Tennten, Dove Wallet, Flybit, Gdak, Aprobit, Huobi, Coin&coin, Probit, Borabit, Coredax and Okbit.

This includes Huobi from China. Other mainstream exchanges have ostensibly "withdrawn" from the Korean market. On August 13, Binance announced that it would immediately stop providing Korean won trading pairs, Korean won payment methods, P2P merchant applications, Korean website support and other services in South Korea. Bybit announced that it would stop supporting Korean on its official platform and operating the official Korean community on social media from September 20, 2021. In addition, Bybit emphasized that it does not support any Korean won market, such as trading pairs, payments or transactions denominated in Korean won.

In order for cryptocurrency exchanges to offer Korean won (KRW) fiat trading, they must also work with banks to provide customers with real-name verified deposit/withdrawal accounts. However, it is expected that only five leading exchanges will be able to complete this cooperation.

On September 17, the Financial Services Commission of South Korea announced that it had convened the first virtual asset business report review committee, which was composed of nine internal and external experts. The committee approved the virtual asset business report submitted by the Korean exchange Upbit. Industry insiders analyzed that this means that Upbit has become the first government-approved exchange under the new Korean regulations. Currently, six exchanges have submitted this report. Upbit's trading volume accounted for 83% of the total in August this year, while the second-ranked Bithumb accounted for only 11.62%.

Jaewoo Cho, a professor at the Department of Social Science at Seoul National University in South Korea, told Wu Blockchain that there will be four to five exchanges that can provide fiat currency trading services for won-cryptocurrency, and other exchanges that have passed ISMS certification can only engage in currency-to-currency services.

Jaewoo Cho said that it is important to note that these exchanges are completely unable to provide derivative services such as contracts/futures. Regarding Korean users continuing to use non-compliant exchanges registered in other countries, Jaewoo Cho said that if obvious problems arise, such as investors being defrauded, the Korean government may take harsh measures, such as blocking their networks.

But Jaewoo Cho also said that in the short term, it seems that the South Korean government will not take any action on global exchanges, so it will not have much impact on the global market.

The Korean market has always been enthusiastic about cryptocurrencies. In April, Nexon, the largest game company in South Korea (MapleStory, KartRider, etc.), purchased $100 million worth of Bitcoin at a high price of $58,266 per Bitcoin, which is less than 2% of its total cash. The largest game company in South Korea explained the reason for the purchase: From January 2020 to now, the money supply in the United States has increased by more than 40%. In this environment, we believe that Bitcoin is one of the cash forms most likely to maintain its value. Bitcoin is the most stable currency.

But at the same time, supervision is also being strengthened. South Korean Minister of Strategy and Finance Hong Nam-ki said that the crypto tax law will take effect on January 1, 2022. The tax law will impose a 20% tax on income generated from crypto transactions exceeding 2.5 million won (about 2,100 US dollars). The community supporting cryptocurrencies is trying to delay this date, and the specific details need to wait for further observation. (Head picture from financemagnates)