South Korean Crypto Trading Volume Spikes Regulatory Crackdown
South Korea holds the title of being one of the most successful countries when it comes to cryptocurrency adoption. Reports on countries with the most crypto use typically include it, and in the last few years, there has been a greater push towards regulatory development for the space.
At the same time, regulators recently announced a crackdown against companies in the crypto space that might be violating the law. While this might be affecting some of the biggest names in crypto, trading volume within the country seems to have only increased following the news.
Exchanges in the Crossfire?
This news comes from South Korea’s Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC). As per the FIU, several foreign exchanges have been providing services to South Korean investors without due registration. These include customer support activities and Korean language versions of their sites.
As the crypto industry has gotten bigger, the South Korean government has been more particular about which exchanges serve its population. In 2022, for example, it blocked the websites of several foreign crypto exchanges for not duly registering, and it seems the same might happen this year as well.
Some of the affected sites include big names in the industry like BitMEX, KuCoin, CoinW, Bitunix, and KCEX. While it is not yet known when sanctions will be put in place or how the exchanges themselves will respond, there is already a precedent. The sanctions placed in 2022 saw several crypto exchanges exit the Korean market altogether, and this has caused some worry among consumers.
What’s more, two major exchanges, Upbit and Bithumb, have been caught up in controversy regarding the listing of tokens on their sites. According to a report, some intermediaries within these exchanges demanded large fees from crypto projects looking to get listed. These were as high as $10 million and have sparked discussion about the process of token listing and how fair it is to newer projects.
Upbit, for its part, has denied these allegations.
“Upbit does not allow the involvement of external agencies to assist or intermediate trading support, and all procedures are conducted directly by Upbit employees. […] please be advised that this is the act of illegal brokers unrelated to Upbit, and we ask for your special caution to prevent any damage from such actions,” an official statement said.
This scandal is especially timely given that there is more emphasis on crypto tokens than ever before. With the success of legacy tokens like Bitcoin and the excitement around new ones, investors in South Korea and beyond are rushing to platforms like up a bit to get their needs met. as Jihyun Lee writes, the top web3 coins are seeing massive demand (source: https://99bitcoins.com/kr/cryptocurrency/best-web3-coins/) and thus, newer ones would be incentivized to do whatever it takes to get listed on an exchange like Upbit or Bithumb.
Tornado Cash Sanctions Lifted
Another significant development in the Korean crypto space has to do with Tornado Cash, an infamous coin mixer. Coin mixers are tools that, as the name implies, mix up tokens so that their origin cannot be traced. While this can certainly be leveraged by privacy-seeking crypto users, it has also been used by criminals.
Notably, Tornado Cash was accused of aiding the Lazarus group, a North Korean hacking collective that is believed to be government-sponsored. Many believe that the group leveraged Tornado Cash to launder billions of dollars in crypto stolen from various exchanges. Given the political situation between North Korea and other countries, the exchange was heavily sanctioned. On top of this, two of its founders were charged in the U.S. Court in 2023 with money laundering and sanctions violations.
Now, the US Treasury is walking back on its decision and removing Tornado Cash from its sanctions list. Despite this, it insists that the threat of North Korean hackers is still very real. Experts believe that the ill-gotten funds are used to support the country’s nuclear weapons program. But while North Korea continues to deny these allegations, major crypto exchanges continue to be attacked.
Conclusion
The crypto scene in Korea has only become more complicated as crypto itself continues to see growth. On the one hand, transaction volumes are higher than they have ever been. On the other hand, regulatory developments mean that major platforms are getting caught in the crossfire and even risk exiting the market altogether. While all this is happening, there is concern about crypto’s role in international relations and possible use for sanctions avoidance. Hopefully, as time goes on, regulators, crypto businesses, and consumers alike can reach a state of harmony while reaping the full benefits of cryptocurrency.