As crackdown looms, provocative South Korean crypto fans dig in

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Representations of Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin cryptocurrencies are placed on the PC motherboard in this illustration taken on June 29, 2021. REUTERS / Dado Ruvic / Illustration

SEOUL, July 13 (Reuters) – Yun Hae-ri, a 26-year-old South Korean cryptocurrency investor, has seen the value of a coin called Metadium nearly wiped out since she bought it in April.

Like many South Korean retail investors, Yun owns thousands of won in smaller cryptocurrencies, seen as alternatives to bitcoin, whose value has plummeted as regulators crack down on the industry.

By September 24, South Korea’s many cryptocurrency exchanges will need to disclose risk management and partner with banks to ensure trading accounts are held by real people.

The rules, analysts say, could result in hundreds of these “altcoins” being delisted by exchanges as they compete for bank reconciliations.

“I have to admit that I didn’t look at the operator’s financials, but invested primarily based on the popularity and appearance of the coin on the recommendation of media and friends,” said said Yun, who trades Metadium on Upbit, the country’s largest crypto exchange. She is now concerned that Metadium will be delisted before the September deadline.

The new law was passed in early March and since then only four of the more than 60 exchanges – Upbit, Bithumb, Coinone and Korbit – have secured the necessary bank partnerships to be registered as virtual asset service providers.

They are also required by law to obtain a security certificate from South Korea’s Internet Security Agency. Only 20 scholarships had received such certificates in May.

Metadium’s price plunged 94% in early April to 32.1 won ($ 0.0281) in late June on Upbit, as several local cryptocurrency exchanges pulled dozens of altcoins from their platforms.

At the end of June, Upbit halted trading in 24 altcoins, such as Komodo, AdEx, Lbry Credits, Ignis, Pica and Lambda. Another major trader Bithumb denied four plays last week.

Small trader Probit pulled 145 coins at once in June, raising concerns among investors that more coins could be phased out as the September deadline approaches.

Officials at Upbit and Bithumb told Reuters that the radiation was part of their periodic coin examinations, and not because of the new regulations.

However, the number of coins listed and their risk profiles would be taken into account by banks as factors in their choice of exchange partnerships, according to the office of opposition lawmaker Yoon Doo-hyun.

GOPAX, one of the most popular exchanges outside of Korea’s Big Four, said it is in talks with several banks and is optimistic that all requirements will be met before the deadline.

‘HODL’

The regulation targets money laundering and high leverage among young South Koreans betting on an industry that has seen coins such as Ether cut to half after rapid surges.

According to data collected by the office of another opposition lawmaker, Kwon Eun-hee, more than two-thirds of new investors on the four major exchanges in the first quarter were under 40.

BofA Securities said in a report released in May that the estimated daily volume of cryptocurrency trading in South Korea reached 1.480 billion won in the first quarter, sometimes exceeding the combined trading volume on the KOSPI exchanges (.KS11 ) and KOSDAQ (.KQ11).

An official with the Financial Services Commission told Reuters that exchanges that do not meet the new regulations would not necessarily need to close, but that they would not be able to trade the won.

“The revised law itself is aimed at preventing illegal money laundering activities. There are laws on user protection and market stability pending and they should be able to further resolve issues with users ( cryptocurrency exchange), ”he said.

Many investors, meanwhile, are determined to “hang on to it”, or “HODL” as we know in the cryptocurrency community.

Lee Jai-kyung, 27, who has invested 40 million won ($ 35,156.18) in cryptocurrencies, says he has lost 56% of his holdings but has no plans to reduce his holdings. losses.

“I’m going to leave my coin investment as is because I’ve already lost so much that there’s no point in withdrawing now,” Lee said. “More than that, I’ll hang on to it because I think there will be another price spike later this year.”

($ 1 = 1,143,7300 earned)

Reporting by Joori Roh Editing by Vidya Ranganathan and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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