The dark reality of Korea’s dazzling crypto industry: Thought to be a popular and buzzing sector, recent insights from top news mediums have revealed shocking details about industry leaders. All this is happening in the wake of Korea’s recent implementation of stricter regulation on crypto businesses.
Stricter Laws Lead To Desperate Crypto Exchanges
Korea has been implementing stricter laws for businesses that deal with digital assets. The relevant one, in this case, is actually an amendment to the Act on Reporting and Using Specified Financial Transaction Information. It requires all businesses dealing with the exchange, storage, and management of virtual assets to report their business to the Korea Financial Intelligence Unit (KoFIU).
The update further states that exchanges must find banks that are willing to partner with them for issuing accounts. Put into effect on 25 March 2021, the law allows a grace period of 6 months. As the deadline looms closer, industry giants scramble to pull themselves out of murky waters.
Moreover, the entity has also drawn up a risk assessment guideline. It classifies exchanges with “a high number and frequency of virtual money transactions” as high risk. The main reason for this is to protect new and old crypto investors from trading with risky coins.
Once the wheels were set in motion, the entire crypto industry in Korea seemed to crumble.
Let’s talk about Upbit. The ‘most trusted crypto exchange’ was one of the first movers in this case. It announced on June 11 a list of risky coins. As per the exchange, these were “coins to watch”. Their overall evaluation “does not meet internal standards, and measures to protect investors are necessary”. Following that, it delisted 5 coins earlier this month. Then, as of now, it announced the delisting of 24 more altcoins. It will implement the action on June 28.
Not only this, but it finds itself in the midst of several lawsuits as it hurries to delist coins ahead of the grace period ending. One such example is of Pica Project which became the first to challenge Upbit in court.
Adding to Upbit’s woes, and to users’ shock, Pica Project exposed on Sunday that the exchange demanded 5 million Pica coins. Valued at about 250 million won ($220,770), these were taken as “commission for listing”. It also accused Upbit of profiting from trade as the handed-out coins were given at 3% while the rest were sold at a higher price. Claiming the delisting decision unjust, the company is set to face Upbit in court on July 5.
Other crypto creators filing cases against the crypto exchange include AnimalGo and Quiztok.
And this is just one exchange. There is no doubt that other major exchanges are also following suit, such as Coinbit. It announced the delisting of eight altcoins and put 28 coins on its investment warning list. For this reason, it is important to understand that the hypocrisy on Upbit’s part is three-fold.
First, it was part of the many banks that were quick to list as many coins as possible to attract investors, regardless of risk assessment and traders’ protection. Then it was the first to delist coins in response to KoFIU’s decision to escape closing down. Finally, note that while Upbit removed coins from the KRW market based on ‘internal standards’, it didn’t remove them from the greater Bitcoin-dominated market. BTC and USDT pairing for them are still available.
The Crypto Review That Requires Its Own Review
Another institution whose unruly practices are affecting what once was Korea’s free and exciting crypto space is Xangle. Local blockchain news media service Decenter has just come out with reports of black money being exchanged in the company. Xangle is Korea’s top destination for digital asset insights.
Decenter has accused Xangle, a public data disclosure service, of taking money bribes in exchange for coin listing support. In fact, the report mentioned the exchange of thousands of KRW in return for such a service. Just a few days ago, Decenter published another article expressing “regret for Xangle’s expression of regret”.
In this article, Decenter disintegrated clauses from Xangle’s Listing Management Service Agreement. It provides proof of how Xangle extracts money from businesses in the name of successful listings.
Other than this, the company has also been misleading the news media.
CEO Kim changed his words regarding this controversy. In a call with Decenter, he said, “The service has been terminated,” but in an interview with another media outlet, he said, “We did not terminate the service because we did nothing wrong.”
This is in reference to its refund policy for crypto listings. These state that successful listings mean that the firm will not return any down payment.
In addition to the listing arrangement fee, Xangle also receives additional fees from the exchange if the project actually succeeds in listing.
Not just this but Xangle’s credit rating service is also under fire. As part of a package offering, it supports listings and evaluates the creditworthiness of coins. In this case, banks used the Xangle service for coin safety evaluation as per the recommendations of the Federation of Banks. It is possible now, however, that a situation may arise where the review itself needs to be reviewed.
An industry official said, As allegations that Xangle has acted as a listing broker have been revealed, we need to examine the facts accurately. He further added,
“The issue of listing price, which is prevalent in the industry, also needs improvement.”
These updates are shocking as Korea has always been looked at as a hotspot for crypto lovers and enthusiasts. Now, international media is full to the brim with news that illegal acts in the industry are rampant in Korea.
If anything, these events dictate that the Korean government needs to come up with even stricter legal sanctions on exchanges. For instance, there are also frequent cases surrounding the manipulation of the trading volume.
At the same time, tougher regulatory practices can only do so much for the country’s crypto industry as it tends to drive away international players from the area.