10 crypto exchanges reportedly filed with Korean regulators
Only 10 cryptocurrency exchanges in South Korea have filed with the nation’s regulators to continue their businesses in the country. Out of this figure, the local industry media have identified the four biggest crypto exchanges – UPbit, Bithumb, Coinone and Korbit.
These platforms — who are collectively referred to as “The Big Four” — are responsible for more than 90% of the crypto trading volumes in South Korea.
Upon completing real-name verification and partnering with a local bank, digital assets platforms are required to acquire a license from the country’s Financial Intelligence Unit (FIU). This is a unit of the Financial Services Commission (FSC), the country’s top financial regulator.
The deadline for acquiring the license had already expired on Friday, meaning that those who didn’t submit their applications will have to shut down in part or completely by midnight today.
Industry experts estimate that more than 50 exchanges will discontinue their operation or reduce services. They will have to cease their service either because they failed to register with the nation’s anti-money laundering body, or because they were unable to have real-name bank accounts issued by commercial banks.
On top of these stricter rules, crypto exchanges must obtain a security certificate from the Information Security Management System (ISMS).
Meanwhile, the Korea’s crypto tax code will come into effect from January 2023. The South Korean government plans to charge residents a 20 percent tax on crypto income, which is worth more than 2.5 million Korean won (about $2,000).
Although no specific taxation standards for crypto assets have been put in place yet, the finance ministry considers re-classifying returns made on cryptocurrencies as a type of ‘other income’. This places crypto profits in the same category as those earned from lotteries, which has a 20 percent tax rate.
Despite the high tax tag levied on ‘other income’, it remains better than being taxed as a form of capital gains as it is currently treated, which calls rates of up to 42 percent.
Historically, South Korea is one of the hottest investing and trading markets for cryptocurrencies. However, authorities have been hesitant to regulate the virtual asset class, due to their belief that cryptocurrency regulation could lend legitimacy to the sector.
Separately, the central bank is taking a ‘wait-and-see’ approach over the issue of a government-controlled cryptocurrency, or a so-called central bank digital currency (CBDC), as of now.