South Korea's cryptocurrency landscape is undergoing a seismic shift following the enforcement of the Special Financial Act, implemented in March 2021. The Financial Services Commission (FSC) mandated that all crypto exchanges register as compliant platforms by September 24, or face immediate closure. This regulatory overhaul has triggered an "exchange extinction wave," with over two-thirds of Korea's 63–66 crypto operators expected to shutter.
Key Developments in the Korean Crypto Market
- Regulatory Deadline: As of the deadline, only 10 exchanges had submitted registration applications. Upbit remains the sole fully approved platform, while 40+ exchanges remain unresponsive about compliance plans.
Licensing Requirements: Exchanges must:
- Obtain ISMS certification from the Korea Internet & Security Agency (KISA)
- Partner with banks for fiat onboarding and real-name account verification
- Market Impact: An estimated ₩3 trillion ($2.5 billion) in "Kimchi Coins" — locally listed altcoins with low liquidity — could become stranded assets.
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Surviving Exchanges: Who Made the Cut?
| Exchange | Status | Services Offered |
|---|---|---|
| Upbit | Fully approved | Fiat + Crypto trading |
| Bithumb | Application submitted | Pending bank partnership |
| Coinone/Korbit | Applications submitted | Crypto-only trading |
| Flybit et al. | Limited operations | Crypto-to-crypto only |
Investor Risks and Market Fallout
- 159 Kimchi Coin projects may lose trading venues, with <100 listed on major exchanges
- Customers of 60+ small exchanges face potential asset freezes
- Non-compliant operators risk 5-year prison sentences or ₩50M fines
Industry analysts warn this "Darwinian shakeout" could permanently alter Korea's crypto ecosystem.
FAQs: Navigating Korea's Crypto Crackdown
Q: Can exchanges operate after September 24 without approval?
A: No. Unregistered platforms must cease operations immediately or face legal consequences.
Q: What happens to assets on closing exchanges?
A: Investors should withdraw funds promptly. Assets may become inaccessible during shutdown procedures.
Q: Are Kimchi Coins worthless now?
A: Not necessarily. Coins listed on compliant exchanges retain value, but illiquid tokens face higher risks.
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The Road Ahead for Korean Crypto
While this regulatory purge creates short-term turbulence, it may ultimately:
- Increase institutional participation
- Reduce scam token prevalence
- Enhance consumer protections
As the dust settles, Korea's crypto market could emerge leaner and more sustainable—but not without significant casualties along the way.
Disclaimer: This content represents market commentary only. Blockachain News assumes no liability for investment decisions made based on this information.
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