Only a handful of virtual asset exchanges in South Korea survived Sept. 24, the day financial authorities stipulated as the deadline to report compliance with the country’s new crypto regulations.
The country’s four major exchanges — Upbit, Bithumb, Korbit and Coinone — are the only ones granted full operation including Korean won-to-crypto trading services by meeting all regulatory requirements. Twenty-five other domestic exchanges have fulfilled one requirement — being certified for information security — but not a second requirement to secure a bank contract for providing real-name accounts for users. Consequently, they were allowed to continue operation only as token-to-token services.
With increasing governance over the virtual asset industry, both groups of exchanges hope to expand their lines of business to be less reliant on crypto transaction fees. Their new ventures include NFTs (non-fungible tokens), DeFi (decentralized finance), the metaverse, and more.
Korbit is the first and only exchange in South Korea to open an NFT market. Korbit’s CEO Oh Se-jin said that Korbit’s NFT market will lead to a “win-win situation” where companies can maximize the digital value of their intellectual properties, while Korbit can pursue a new business model aside from earning transaction fees. Korbit also opened Korbit Town, its own metaverse that acts as a social community where users can communicate with or gift crypto to each other.
Bithumb partnered with commerce and distribution company Bucket Studio to set up Bithumb Live, to be launched in November. It plans to become the first multi-commerce platform in South Korea mixing NFTs, a crypto payment system, the metaverse and online commerce. Bithumb and Bucket Studio each invested 6 billion won (about US$5.1 million) and became the two largest shareholders of The LIP, a live commerce shopping platform, which will likely be reconstructed as Bithumb Live. Dunamu, the owner of Korea’s largest exchange Upbit, is also acquiring a metaverse-based startup named Tenuto.
Meanwhile, Coinone jumped into servicing DeFi for users under the name Coinone Plus. Coinone Plus provides investors a crypto staking service where they can entrust their assets to the blockchain network for a certain amount of cryptocurrency rewarded as interest in return. Upbit had opened a beta version of a staking service last September, which closed in January this year for service renewal.
Professor Lee Byung-uk, professor of digital finance at Seoul School of Integrated Sciences & Technologies (aSSIST), told Forkast.News in an interview: “The [popularity] of the coin market has extreme ups and downs that these exchanges are always anxious about. I see it as a natural struggle to survive. It’s the current volatility of popularity, but in the future, the coin market will be largely influenced by regulations.”
On the other hand, exchanges that have yet to fulfill all government standards and operate under only token-to-token services still strive for full compliance, while some have started preparing new projects.
Coredax told Forkast.News it is focusing on strengthening security technologies and its anti-money laundering system rather than diving into new businesses. The exchange recently announced it will recruit 53 new employees to continue developing the existing business.
Another exchange Foblgate told Forkast.News it is “internally discussing possible new ventures,” but is concentrating its forces on complying with existing crypto regulations. Aprobit is also reported to be planning new ventures outside of token trading.
On top of the crypto exchange regulations that went into full effect in September, South Korean authorities are planning to tax income from virtual assets beginning Jan. 1, 2022, while the country’s adaptation of the Financial Action Task Force’s (FATF) anti-money laundering guidelines gave exchanges until March next year to construct systems to correspond to the guidelines.