As crackdown looms, South Korea’s defiant crypto fans dig in

SEOUL: Yoon Hae-ri, a 26-year-old South Korean cryptocurrency investor, has seen the value of a coin called Metadium almost disappear since she bought it in April.

Like many South Korean retail investors, Yoon has thousands of won in small cryptocurrencies considered as an alternative to bitcoin, which have plummeted in price as regulators crack down on the sector.

By September 24, numerous cryptocurrency exchanges in South Korea will have to disclose information about risk management and cooperate with banks to ensure that trading accounts belong to real people.

According to analysts, the rules may lead to the fact that exchanges will exclude hundreds of such “altcoins” from the list, since they compete for connections with banks.

“I have to admit that I didn’t look at the financial statements of the operator, but mostly invested based on the popularity of the coin and its appearance in the media and the recommendations of friends,” said Yun, who trades Metadium on Upbit, the country’s largest crypto exchange. Now she worries that Metadium may be removed from the list ahead of the September deadline.

The new law was adopted in early March, and since then, only four of the more than 60 exchanges-Upbit, Bithumb, Coinone and Korbit-have provided the partnerships with banks necessary to register as virtual asset service providers.

The law also requires them to obtain a security certificate from South Korea’s Internet Security Agency. As of May, only 20 exchanges have received such certificates.

The price of metadium has fallen by as much as 94% since the beginning of April to 32.1 won (0.0281 US dollars) at the end of June on Upbit, as several local cryptocurrency exchanges have withdrawn dozens of altcoins from their platforms.

At the end of June, Upbit stopped trading 24 altcoins, such as Komodo, AdEx, Lbry loans, Ignis, Pica and Lambda. Another major operator, Bithumb, withdrew four coins last week.

The smaller operator Probit removed 145 coins at once in June, which caused investors to worry that as the deadline in September approaches, more coins may be removed.

Upbit and Bithumb officials told Reuters that the delisting was part of their periodic coin reviews, not because of the new rules.

However, according to the office of opposition lawmaker Yoon Doo Hyun, banks will weigh both the number of coins listed and their risk profiles as factors when choosing exchange partnerships.

GOPAX, one of the most popular exchanges outside of the four largest in Korea, 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 a high level of leverage among young South Koreans betting on a sector in which coins such as ether have halved after rapid jumps.

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

A report by BofA Securities published in May said that the estimated daily volume of cryptocurrency trading in South Korea reached 1.480 trillion won in the first quarter, sometimes exceeding the combined trading volume on the KOSPI and KOSDAQ stock exchanges.

An official of the Financial Services Commission told Reuters that exchanges that do not comply with the new rules will not necessarily need to be closed, but they will not be able to trade the won ones.

“The revised law itself is aimed at preventing illegal money laundering activities. Laws on user protection and market stability are under consideration, and they should be able to additionally solve problems with users (of the cryptocurrency exchange), ” he said.

Meanwhile, many investors are determined to “hold on with all their might”, or “HODL”, as it is known in the cryptocurrency community.

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

“I’m going to leave my investment in coins as it is, because I have already lost so much that there is no point in withdrawing money now,” Lee said. “Moreover, I will hold on to it, because I believe that one more price jump will occur at the end of this year.”

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