10 crypto exchanges reportedly filed with Korean regulators
Only 10 cryptocurrency exchanges in South Korea have applied to the country’s regulators to continue operating in the country. On this figure, local industry media have identified the four largest crypto exchanges – UPbit, Bithumb, Coinone and Korbit.
These platforms – which are collectively referred to as “the big four” – are responsible for over 90% of South Korea’s crypto transaction volumes.
After real name verification and partnership with a local bank are complete, digital asset platforms must acquire a license from the country’s Financial Intelligence Unit (FIU). It is a unit of the Financial Services Commission (FSC), the country’s main financial regulator.
The license acquisition deadline had already expired on Friday, meaning those who did not submit their applications will have to partially or fully close before midnight today.
Industry experts estimate that more than 50 exchanges will cease operations or cut back on their services. They will have to cease their service either because they did not register with the national body against money laundering, or because they could not have bank accounts in their real name issued by commercial banks.
In addition to these stricter rules, crypto exchanges must obtain an Information Security Management System (ISMS) security certificate.
Meanwhile, Korea’s crypto tax code will take effect from January 2023. The South Korean government plans to charge residents a 20% tax on crypto revenue, which is over 2.5 million dollars. Korean won (approximately $ 2,000).
While no specific tax standards for crypto assets have yet been put in place, the Ministry of Finance is considering reclassifying returns made on cryptocurrencies as a type of “other income”. This puts crypto profits in the same category as those earned by lotteries, which have a 20% tax rate.
Despite the high tax levied on “other income”, this is still better than being taxed as a form of capital gain as it is currently treated, which calls for rates of up to 42%.
Historically, South Korea has been one of the hottest investment and trading markets for cryptocurrencies. However, the authorities were hesitant to regulate the virtual asset class, as they believed that the regulation of cryptocurrencies could give legitimacy to the industry.
Separately, the central bank is taking a “wait and see” approach to the issue of a government-controlled cryptocurrency, or so-called central bank digital currency (CBDC), from now on.