Regulation
South Korean crypto exchanges under investigation for fee hikes after new regulations
South Korea’s Financial Supervisory Service (FSS) has summoned five major cryptocurrency exchanges following the implementation of new cryptocurrency laws, signaling increased scrutiny of industry practices. The move follows aggressive fee hikes by major market players, raising concerns over fair competition and user protection.
Cryptocurrency exchanges in South Korea under scrutiny
South Korea’s Financial Supervisory Service (FSS) has summoned the country’s five top leaders. crypto exchanges These are Upbit, Bithumb, Coinone, Korbit, and Gopax to address the ongoing controversy over deposit user fees. This urgent meeting, which was held on July 24, 2024, follows the intensification of competition among exchanges to increase their fee rates following the implementation of the Virtual Asset User Protection Act.
The FSS’s intervention was triggered by Bithumb’s announcement on July 23 that it would increase its user fee rate from 2.2% to 4.0% per annum, a decision that was later withdrawn. The move follows a series of fee hikes by various exchanges since the law was implemented on July 19-20, with Upbit increasing its rate from 1.3% to 2.1%, and Korbit following suit with an increase to 2.5%.
Financial authorities have deemed Bithumb’s 4% rate potentially unreasonable, citing Article 5 of the Regulation on the Supervision of the Virtual Asset Industry. That article states that deposit usage fees must be “reasonably calculated” based on operating income and expenses incurred.
During the meeting, the FSS sought to review methods for calculating deposit usage fees and resolve disagreements among exchanges regarding reasonable fee levels. South Korean cryptocurrency exchanges were required to provide detailed information on their deposit management practices and fee calculation methods.
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A broader regulatory landscape and future implications
The deposit fee controversy comes amid a broader regulatory shift in South Korea’s cryptocurrency market. The FSS had previously announced plans to implement a system to monitor unusual crypto trading activity, requiring exchanges to provide detailed data. This aligns with the new Virtual Asset User Protection Act.
Simultaneously, the Digital Asset Exchange Alliance (DAXA) launched a comprehensive review of more than 1,300 digital assets to ensure compliance with the new legislation. This revision, while not a massive delisting effort, could pose problems for altcoins struggling to meet regulatory standards.
The FSS guidelines set clear parameters for identifying suspicious trading activities, including abnormal volumes and price ranges, large transactions, and slow execution. Failure to comply could result in severe penalties, marking the beginning of a new era of rigorous surveillance in South Korea. crypto walk.
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