South Korea’s New Crypto Law Causes Major Decline in Trading Volumes Across Exchanges

Aiming to construct a well-ordered market and provide a safer environment for crypto users, the Act on the Protection of Virtual Asset Users entered into force in South Korea on July 19, 2024. On major South Korean cryptocurrency exchanges, the immediate effect on trade volumes has been noteworthy, nevertheless, with recorded decreases.

Effect on Upbit and Other Principal Exchanges

Originally started by Dunamu in October 2017, Upbit has grown quickly to rank as the biggest cryptocurrency exchange in South Korea. Maintaining a top market share, Upbit is well-known for its easy-to-use interface and large selection of approved cryptocurrencies. Despite its popularity, CoinGecko reports that Upbit’s trading volume dropped by 29.4% in the past 24 hours, reaching $1.50 billion. This dramatic drop emphasizes how initially the market responded to the new regulatory environment.

One of the first and most well-known crypto  exchanges in South Korea established in 2013, Bithumb also saw a significant drop in trading volume. It posted a 24.7% decline, which down its trading volume during the last 24 hours to $425.22 million.

Coinone also Effected by Crypto Laws

Among the main exchanges, Coinone, launched in 2014 and well-known for its strong trading platform and several services including staking and lending, suffered the most. Reflecting the increased sensitivity of the market to the legislative amendments, its trading volumes fell by 38.4% to $23.36 million.

Mirroring Coinone’s decrease with a 38.4% reduction to $5.07 million over the past 24 hours, Korbit, another pioneering exchange started in 2013, has been essential in advancing bitcoin acceptance in South Korea.

Synopsis of the New Crypto Rules

The Act on the Protection of Virtual Asset Users aims to fill in the voids in the past legal system, which mostly concentrated on anti-money laundering policies. Important features of the new crypto legislation consist in:

Virtual asset service providers (VASPs) have to pay interest on the money they retain in safe custody for their clients at banks. Virtual assets of users have to be kept apart from those of the VASPs.

VASPs have to set up a reserve fund for such situations or insure against liability from network breakdowns or hacking.

The Act compels surveillance for dubious transactions and timely reporting to South Korea’s Financial Supervisor Service (FSS), thus regulating unfair trading activity. Those involved in unfair trade practices risk fines or criminal consequences.

Authority to oversee, inspect, and punish VASPs falls to the Financial Services Commission (FSC) and the FSS. Corrective orders, suspended business activities, and administrative fines are among these remedial actions.