Assembly puts brakes on crypto exchange shutdowns

Fears grow over Upbit monopolizing domestic market

Both the ruling and the opposition lawmakers are pressuring financial authorities to prevent the “annihilation” of small-size cryptocurrency exchanges in the domestic market, following the enforcement of tougher regulations taking effect next month, which could result in an oligopoly or even lead to a monopoly.

Financial authorities are hoping to see rationalization of the domestic cryptocurrency market. While there are possibilities that a new order could prevail in the country’s crypto-world thanks to sustained efforts for regulators towards the path, the market rationalization could lead to a single dominant player having a monopoly in the worst-case scenario.

Rep. Yoo Dong-soo of the Democratic Party of Korea (DPK) told The Korea Times that the party’s taskforce members will meet representatives from the Financial Services Commission (FSC) sometime next week, after Friday’s confirmation hearing on FSC Chairman nominee Koh Seung-beom. Yoo is leading the ruling party’s taskforce on virtual assets.

The taskforce members have held several meetings with experts and representatives from exchange operators over the past few months.

Overall issues regarding the new regulations, including allowing banks to be exempt from responsibilities for illegal acts involving their affiliated cryptocurrency exchanges, will be discussed in the forthcoming meeting, according to the two-term lawmaker.

“We will listen to the government’s opinion about the Act on Reporting and Use of Certain Financial Transaction Information, in addition to its understanding about virtual assets,” he said by telephone.

The new law is forcing exchange operators to submit reports on their names, locations and CEOs to the Korea Financial Intelligence Unit commissioner until Sept. 24, after forming partnerships with commercial banks that enable operation with real-name accounts.

However, the banks have remained reluctant to provide minor exchanges with real-name accounts in order to avoid taking responsibility for the exchanges’ possible misconduct.

Bithumb and Coinone, both of which are among the nation’s four-largest cryptocurrency exchanges along with Upbit and Korbit, are also facing difficulties in getting real-name accounts from their affiliated bank, NongHyup.

At this moment, Upbit is the only cryptocurrency exchange that has finished filing its report, as K bank agreed to continue their partnership.

Market observers expect pressure from the ruling party to prompt the financial authorities to allow banks to be exempt from responsibilities for their affiliated exchanges.

“Once we listen to the opinions of the authorities, it will become clear whether or not additional exchanges will file their reports,” Yoo said.

Not surprisingly, the opposition party is urging the government to delay the enforcement of the new regulations for six months. The ruling DPK and the financial authorities have remained skeptical about this.

Rep. Yun Chang-hyun of the People Power Party (PPP), who is leading the main opposition’s taskforce on virtual assets, said separately that he will call on the FSC chairman nominee to allow banks to be exempt from responsibilities for misconducts by their affiliated exchanges, during the confirmation hearing on him Friday.

“The government lacks objectivity and transparency in carrying out an administrative act,” the lawmaker told by telephone. “The forced shutdown of exchanges will prompt a series of litigations, which will cost a huge amount of money and time.”

In contrast, the DPK’s virtual assets taskforce leader said the nominee must not have had enough time to understand the issue, implying that the ruling party will minimize questions about virtual assets during the hearing.

The nominee previously mentioned the necessity of regulations in his column eight years ago, saying that bitcoin cannot be an exception for the stability of the financial system and the protection of financial consumers.

The PPP’s taskforce plans to visit the headquarters of ProBit cryptocurrency exchange, Wednesday, to listen to the opinions of 20 exchange operators about the forthcoming new regulations.

The Korea Blockchain Association representing cryptocurrency exchanges, recently issued a statement and urged the financial authorities, banks and the National Assembly to fulfill each of their responsibilities for the nation’s minor exchanges on the brink of shutdowns.

“We hope each institution does not neglect the contributions of exchange operators to the development of the blockchain and virtual assets technologies,” Chairman Oh Kap-soo of the association said.

박재혁(2021.08.23) Assembly puts brakes on crypto exchange shutdowns
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