Mid-sized crypto exchange Foblgate announced the closure of its Korean won (KRW) trading functions in advance of a government mandate banning digital asset platforms from operating cash-to-crypto services without a local bank partnership.
Fast facts
- Foblgate announced it is temporarily suspending its KRW withdrawal, deposit and trading market between cryptocurrencies and the Korean won. Instead, it says it will operate a Bitcoin (BTC) market where users can trade altcoins with Bitcoin. The announcement added that despite meeting its obligations in acquiring the Information Security Management System (ISMS) certification and establishing an Anti-Money Laundering (AML) system, it could not fully comply with the government’s crypto regulations, which left Foblgate no choice but to close down its KRW market.
- “A situation similar to a bank run is expected near the deadline as investors can’t cash out of their holdings of ‘alt-coins’ listed only on small exchanges,” Lee Chul-yi, head of Foblgate, told the Financial Times. “They will find themselves suddenly poor. I wonder if regulators can handle the side-effects.”
- South Korea’s latest crypto regulations mandate exchanges to comply with two major standards: obtaining the ISMS certification and securing a bank contract that will provide users with real-name withdrawal and deposit accounts. Exchanges that fail to get the ISMS certification by Sept. 24 will be shut down, while exchanges that have been certified but have not attained the real-name account bank contract need to suspend all cash-to-crypto functions to continue running, on which users need to be notified by Sept. 17.
- Several other exchanges in South Korea have also announced closure of their KRW-to-crypto services. Coredax revealed its KRW market closure on Sept. 8, while Flybit and Bitcmon made similar announcements on Sept. 10. These exchanges, along with Foblgate, have told users they will make a full effort to get a real-name account bank contract in the near future to reopen their cash-to-crypto markets.
- According to Coinhills, the Korean won is the world’s third most used currency for trading Bitcoin, behind the U.S. dollar and the euro. Data show many younger South Koreans facing high real estate and other costs invest in high-risk, high-return virtual assets.
- Members of the crypto industry in South Korea claim an estimated US$2.5 billion to US$8.5 billion in damages will be caused if the country persists in imposing the new regulations. The rules are designed to improve investor protection and transparency in crypto transactions.