Like many South Korean retail investors, Yun has thousands
of won in smaller cryptocurrencies, seen as alternatives to bitcoin, which have
plummeted in value as regulators crack down on the sector.
By Sept. 24, South Korea's numerous 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 exchanges delisting
hundreds of such "altcoins" as they vie for tie-ups with banks.
"I have to admit that I did not look at the operator's
financial statement, but mostly invested based on the coin's popularity and
appearance on media and friends' recommendation," said Yun, who trades
Metadium on Upbit, the country's largest crypto exchange. She now worries
Metadium could be delisted ahead of the September deadline.
The new law was passed in early March and since then, only
four of more than 60 exchanges--Upbit, Bithumb, Coinone and Korbit--have
secured the partnerships with banks needed to be registered as virtual asset
service providers.
The law also requires them to obtain a security certificate
from South Korea's internet security agency. Only 20 exchanges had received
such certificates as of May.
Metadium's price plunged as much as 94% from early April to
32.1 won ($0.0281) in late June on Upbit, as several local cryptocurrency
exchanges took dozens of altcoins off their platforms.
In late June, Upbit halted trading of 24 altcoins, such as
Komodo, AdEx, Lbry Credits, Ignis, Pica and Lambda. Another major operator
Bithumb nixed four coins last week.
Smaller operator Probit removed 145 coins all at once in
June, sparking concern among investors that more coins could be removed as the
September deadline approaches.
Both Upbit and Bithumb officials told Reuters that the
delistings were part of their periodical coin reviews, not because of the new
regulation.
However, both the number of listed coins and their risk
profiles would be weighed by banks as factors in their choices around exchange
partnerships, according to opposition lawmaker Yoon Doo-hyun's office.
GOPAX, one of the more popular exchanges outside of Korea's
major four, said it is in talks with multiple banks and was optimistic about
meeting all requirements ahead of the deadline.
The regulation targets money laundering and high leverage
among young South Koreans betting on a sector that has seen coins such as ether
halve after rapid surges.
According to data gathered by the office of another
opposition lawmaker, Kwon Eun-hee, more than two-thirds of new investors on the
four major exchanges during the first quarter were under 40.
BofA Securities said in a report published in May that the
estimated daily volume of South Korean cryptocurrency trading reached 1,480
trillion won in the first quarter, sometimes exceeding the combined trading volume
on the KOSPI and KOSDAQ stock exchanges.
An official at the Financial Services Commission told
Reuters that exchanges that didn't meet new regulations would not necessarily
need to close, but they would not be able trade in 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 address issues with
(cryptocurrency exchange) users," he said.
Many investors, meanwhile, are determined to "hold on
for dear life", or "HODL" as it's know in the cryptocurrency
community.
Lee Jai-kyung, 27, who invested 40 million won ($35,156.18)
in cryptocurrencies, says he has lost 56% on his holdings but has no plan on
cutting his losses.
"I'm going to leave my coin investment as it is because
I've lost so much already there's no point in withdrawing now," Lee said.
"More than that, I'll be holding on to it because I believe that there
will be another price surge later this year." -Reuters