One Week After the Special Financial Transactions Act Deadline... The Four Major Exchanges Have Quieted Down Instead

Trading Volume on Four Major Exchanges Nearly Halved After Enforcement of the Special Act on Reporting and Use of Certain Financial Transaction Information
Initial Confusion Due to KYC Possible... Bithumb, Coinone, and Korbit Cannot Guarantee Approval of Registration

[Asia Economy Reporter Gong Byung-sun] A week has passed since the deadline for reporting under the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Transactions Act), and the trading volume of the four major domestic cryptocurrency exchanges (Upbit, Bithumb, Coinone, Korbit) remains subdued. It was expected that small and medium-sized investors would flock to the four major exchanges under the supervision of financial authorities, but it is interpreted that there are still issues that exchanges need to go through, such as customer identification verification (KYC) system and approval of virtual asset service provider registration.

According to cryptocurrency market data site CoinGecko on the 1st, the trading volume of the four major exchanges, which reached 9.3318 trillion KRW as of September 25, decreased to 5.3088 trillion KRW on the 28th. In particular, Upbit's trading volume, which reached 8 trillion KRW on the 25th of last month, temporarily dropped to 2.9207 trillion KRW on the 28th. As of the 1st, the trading volume of the four major exchanges has somewhat recovered to 9.1299 trillion KRW.

Initially, the industry expected investors to flock to the four major exchanges after the reporting deadline of the Special Financial Transactions Act on the 24th of last month. This was because investors of small and medium-sized exchanges, whose KRW trading was blocked or whose operations were suspended, were expected to choose the four major exchanges. Additionally, as the authorities began full-scale supervision, the investment environment was evaluated to be relatively safer than before.

Factors Weakening Investor Sentiment Remain, Such as KYC and Financial Authorities’ Registration Approval

[Image source=Reuters Yonhap News]

However, in the case of Upbit, investor sentiment appears to have weakened further ahead of the immediate implementation of KYC. KYC refers to the system under which cryptocurrency exchanges are obligated to verify the identity of customers who trade over 1 million KRW to prevent money laundering according to the Special Financial Transactions Act. On the 28th of last month, Upbit announced that starting in October, members trading over 1 million KRW will undergo an identity verification process. An industry insider explained, "Since personal resident registration numbers must be verified, the regulatory intensity has increased compared to before," adding, "As a new identity verification procedure is introduced, there may be confusion during the initial implementation."

The other exchanges also do not yet provide an environment where investors can fully trust and invest. This is because the financial authorities have not yet decided on the approval of Bithumb, Coinone, and Korbit’s registrations. The Financial Services Commission plans to disclose the approval status after a three-month review process. If issues related to customer asset management and security are pointed out during the review and registration is not approved, the respective exchanges must immediately cease operations. Since the investor deposits at Bithumb, Coinone, and Korbit amount to about 16 trillion KRW, the damage is expected to be significant if operations are suspended.

The issue of cryptocurrency taxation, which will be implemented from January 1 next year, also makes investors uneasy. Due to the tax rate of 20%, cryptocurrency investors continue to express dissatisfaction. However, the political circles advocating for the postponement of cryptocurrency taxation are being drawn into the Hwacheon Daeyu issue ahead of the national audit. In fact, the adoption of Lee Seok-woo, CEO of Upbit, as a witness requested by both ruling and opposition parties was unsuccessful. Professor Hong Ki-hoon of Hongik University’s Department of Business Administration said, "Cryptocurrency taxation may weaken investor sentiment," but added, "The fundamental principle that there is tax where there is income is important."

This content was produced with the assistance of AI translation services.