Reports indicate that blockchain and crypto projects prefer to list their tokens on platforms outside the country blaming the increasingly restrictive nature of the virtual currency trading scene in South Korea.
Meanwhile, exchanges are enjoying a new lease of life in many places across Southeast Asia as regulators continue to create an enabling environment for crypto commerce.
97% of South Korean Cryptocurrency Exchanges About to Go Bust
According to Business Korea, there seems to be no end in sight to the travails currently facing cryptocurrency exchanges in South Korea. Such is the sorry state of affairs for these platforms that reports say up to 97% of them are facing imminent bankruptcy.
The problem for many platforms is the continued decline in cryptocurrency trading volume in South Korea. Only a handful of platforms in the country can be found in the top-100 cryptocurrency exchanges by 24-hour volume.
To further pile on the misery, blockchain businesses are electing not to list their projects on local exchanges. This trend is despite the fact that the country has a vibrant digital economy with a plethora of startups developing projects using distributed ledger technology (DLT).
Regulatory Environment Not Helping Issues
The increasingly stricter nature of virtual currency regulations has also aided in the creation of an unfavorable environment for crypto commerce in South Korea. Investors are reportedly unable to make fiat withdrawals in Korean Won.
Back in July, banks in the country began to put cryptocurrency exchanges under heavier anti-money laundering (AML) scrutiny. These banks say exchanges that fail to comply with the new AML paradigm will have their baking services revoked.
While the ‘big four’ of Coinone, Korbit, Upbit, and Bithumb may be able to scale these stringent AML hurdles, the lesser-known ones may face a hard time of it. Already, about 200 of these smaller platforms are unable to open real-name virtual accounts with commercial banks in the country.
For the banks, the increase in scrutiny is part of efforts to implement the recent guidelines released by the Financial Action Task Force (FATF) regarding the governance of cryptocurrencies.
As previously reported by Blockonomi, Bithumb and a few other platforms have updated their terms and conditions to indicate their readiness to accept full responsibility for all losses irrespective of the cause.
Might Not Recover from Tough 2018
The low trading volume and investor apathy are exacerbating an already dire situation for exchanges in South Korea coming off a dismal 2018. The year-long bear market decimated revenues for even the major platforms.
Only one out of the big four cryptocurrency exchanges in South Korea recorded any profits in 2018. Bithumb’s losses even eclipsed the figures reported by the other two platforms.
Already, some exchanges in the country have been forced to shut down their operations. The others still in operation also have to worry about incessant hacks from cybercriminals in neighboring North Korea.
Southeast Asia is the New Crypto Utopia
South Korea’s loss seems to be turning out to be favorable for Singapore, Thailand, and other countries in Southeast Asia. Bithumb recently unveiled Bithumb Singapore indicating a move to the country that is increasingly becoming more crypto-friendly.
Philippines central bank also continues to grant operating licenses to cryptocurrency exchanges. This trend may see a migration of business from South Korea to the Philippines.
Rather than enacting strict regulations, authorities in Thailand have made efforts to create a well-defined regulatory paradigm for cryptocurrency exchanges, initial coin offerings (ICOs), and other aspects of the virtual currency scene.