This country's cryptocurrency exchanges face an existential threat

New regulations in South Korea for cryotocurrency exchanges pose an existential threat to some smaller crypto exchanges and can create problems for investors.

The country's Financial Services Commission (FSC) has set a September 24 deadline for complying with the new regulations. Among others, the regulations requires crypto exchanges to partner local banks and open account of customers with their real names in order to obtain business licence. However, the banks are wary of the new regulations as it can make them liable for money laundering through cryptocurrencies.

"The new law is putting us on the spot. It will be difficult for us to open new deals with crypto exchanges, given the inherent risks involving cryptocurrency trading, unless the government gives us a clear guideline," The Financial Times quoted an official at one of country's leading bank as saying.

Many fear the new regulations will lead to only the top four biggest exchange surviving. Upbit, Bithumb, Korbit and Coinone are the biggest crypto exchanges in the country and have already tied up with banks. Upbit and Bithumb said they are preparing to register with the FSC, the publication said.

Also read: Khul Ja Sim Sim! Microsoft makes coding super easy, anyone can do it

"We are facing an existential crisis. We want to legitimise our business but banks are reluctant to offer us real-name accounts," Lee Chul-ie, Head of Foblgate, the country's fifth-largest exchange, said.

The regulations may lead to a situation where smaller exchanges either close down or move offshore.

Cryptocurrencies are facing intense scrutiny from regulators across the countries. Last week, US Federal Reserve chief Jerome Powell said cryptocurrencies pose risks to financial stability, and indicated that greater regulation of the increasingly popular electronic currency may be warranted.

The country's Treasury Department also flagged its concerns that wealthy individuals could use the largely unregulated sector to avoid tax and said it wanted big crypto-asset transfers reported to authorities.

Meanwhile in India, the debate is heating up if the government will ban cryptocurrencies or regulate them. While the government has some reservations regarding cryptocurrencies, it is also working on its digital currency. Experts see the decision by Ministry of Corporate Affairs to make it mandatory for companies to disclose crypto trading/investments during the financial year as a positive step, which will lead to regulation of digital currencies.

Also read: Exclusive: GST Council to discuss Covid cess on power, pharma sector in Sikkim