Regulation
Upbit and Other South Korean Exchanges Suffer as New Cryptocurrency Law Goes Into Effect
On July 19, 2024, the Virtual Asset User Protection Act came into effect in South Korea. The new cryptocurrency law aims to create a safer environment for virtual asset users and establish a healthy order in the virtual asset market. However, the immediate impact on the trading volumes of major South Korean cryptocurrency exchanges, including Upbit, was significant. These exchanges reported notable declines in their trading volumes.
Impact on Upbit and other South Korean CEXs
Upbit, founded in October 2017 by Dunamu, has quickly become the largest cryptocurrency exchange in South Korea. Upbit Exchange has maintained a leading position in the market thanks to its user-friendly interface and a wide range of supported cryptocurrencies.
However, in the past 24 hours, Upbit’s trading volume has dropped 29.4%, falling to $1.50 billion, according to CoinGecko. Furthermore, this significant decline highlights the market’s initial reaction to the new regulatory environment.
Founded in 2013, Bithumb is one of the oldest and best-known in South Korea. cryptocurrency exchanges. It has consistently ranked among the top 50 exchanges in terms of trading volume and user base. Despite its notoriety, Bithumb saw a 24.7% drop in trading volume to $425.22 million in the last 24 hours.
Founded in 2014, Coinone has positioned itself as a major player in the South Korean cryptocurrency market. It offers a robust trading platform and various services, including staking and lending. Coinone was the hardest hit among the major exchanges, with trading volumes falling 38.4% to $23.36 million. Moreover, this sharp decline reflects the market’s increased sensitivity to regulatory changes.
Korbit, one of South Korea’s pioneering exchanges, was founded in 2013 and has been instrumental in the country’s adoption of cryptocurrencies. Korbit mirrored the impact on Coinone with a 38.4% surge to $5.07 million in the past 24 hours.
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Overview of the new cryptocurrency regulations
The Virtual Asset User Protection Act aims to address various gaps in the previous regulatory framework, which was primarily focused on anti-money laundering measures. Key provisions of South Korea’s new cryptocurrency law include:
1. Protection of users’ deposits and assets: Virtual asset service providers (VASPs) must keep customers’ deposits safe in banks and pay interest on these deposits. Users’ virtual assets must be segregated from VASP assets.
2. Insurance and reserve funds: VASPs are required to insure themselves against liabilities related to computer hacking or network outages or to establish a reserve fund for such eventualities.
3. Regulation of unfair commercial activities: The law requires monitoring of suspicious transactions. It also requires immediate reporting to the South Korean Financial Supervisory Service (FSS). Those involved in unfair business activities are subject to severe penalties, including criminal or financial penalties.
4. Powers of supervision and sanction: The Financial Services Commission (FSC) and the FSS are empowered to supervise, inspect and sanction VASPs. This includes issuing corrective orders, suspending business operations and imposing administrative fines.
Additionally, in anticipation of the new law, financial authorities and VASPs have been working closely together to ensure compliance. South KoreaThe FSC prepared detailed subordinate statutes and the FSS proposed on-site consultations and a roadmap for VASPs.
In addition, a pilot test was conducted to assess readiness. The Digital Asset Exchange Alliance (DAXA) and 20 virtual asset exchange service providers have also developed best practice guidelines to support self-regulation within the industry.
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