Delisting of smaller altcoins and exchange shutdowns could see investors lose more than $2.6 billion
Almost two-thirds of cryptocurrency exchanges in South Korea could shut down for non-compliance with new regulatory requirements, the Financial Times has reported.
The dour outlook for the Korean crypto market comes from the fact that a deadline set for exchanges to have complied with new requirements is just days away, but several platforms are yet to institute the given guidelines.
The Financial Services Commission (FSC) demands that digital asset exchanges should, by the set deadline, demonstrate that their customer dealings are with real people holding real-name accounts with a bank. According to the financial watchdog, the regulations are meant to protect customers and guard against such activities as money laundering and tax evasion.
As 24 September moves closer, the Korean regulator expects all cryptocurrency exchanges to have adhered to the new requirements, in partnership with provider banks.
But according to the report, most of the country’s smaller platforms are yet to institute the required changes. This, as the publication notes, puts almost 40 out of 60 crypto platforms at risk of having to shut down for non-compliance.
Sources have reportedly told the Financial Times that up to 42 smaller altcoins, locally known as “kimchi coins” will be affected by the imminent shutdown. With the smaller platforms accounting for 90% of the kimchi coins’ trading volume, the publication estimates losses could exceed $2.6 billion.
According to Lee Chul-Yi of Foblgate, one of the smaller exchanges, the crackdown will end with most traders “suddenly poor” amid withdrawal difficulties occasioned by the rush to cash out. According to Chul-Yi, the deadline will see something akin to “a bank run” as people scramble to liquidate their holdings.
The news appears to have jolted the crypto market into some selling on Monday morning. At the time of writing, Bitcoin (BTC) price has declined below $45,000 and Ethereum below $3,250 after correcting 3% and 5%, respectively.