Although it has been over 100 days since financial authorities introduced the real-name trading system for cryptocurrencies, transactions are still made through corporate accounts.
The domestic cryptocurrency market is getting more opaque as the financial authorities are not pushing hard banks and cryptocurrency exchanges toward using real-name accounts.
While the financial regulator is sitting on its hands on the matter, new cryptocurrency exchanges are mushrooming, making the cryptocurrency market more disorderly.
According to cryptocurrency industry sources on May 9, there are over 100 cryptocurrency exchanges in South Korea, including those that are preparing to start business.
The figure stood at around 60 in January when Kim Yong-beom, vice chairman of the Financial Services Commission (FSC), announced the introduction of real-name deposit and withdrawal services for cryptocurrencies. Since then, 40 new exchanges have emerged.
The problem is that no exchanges other than the big 4, including Upbit, Bithumb, Coinone and Korbit, have been issued real-name accounts by banks, meaning that they offer services through corporate accounts or crypto to crypto (C2C) trading.
Cryptocurrency industry insiders say that the domestic cryptocurrency market has been neglected by the financial authorities, as the regulator regards the use of real-name accounts as a matter that should be resolved through talks between exchanges and banks.
Foreign exchanges, like Huobi, are operating in Korea, further crowding the domestic market. They are attracting customers by allowing them to make transactions through corporate accounts, instead of real-name accounts.
Accordingly, the financial authorities themselves are undermining the purpose of the real-name system which is designed to improve transparency in cryptocurrency trading.
Under the current law, the financial authorities are not empowered to supervise cryptocurrency exchanges so they indirectly inspect the actual conditions through banks. The regulator tells banks to decide on their own whether to open real-name accounts for cryptocurrency trading. But at the same time, the regulator warns them that they could be subject to intensive investigation if they open new accounts. Banks are on the horns of a dilemma.
Some watchers suspect that the financial authorities are seeking to keep major exchanges, mainly the big four, in operation, killing other small and mid-size exchanges.
But the authorities’ failure to implement the real-name trading system has resulted in rampant illegal trading. This is why concerns are growing that the market will be disturbed further as more and more foreign exchanges are pushing into the South Korean market.
An expert, who requested anonymity, said, “After Japan and the United States tighten regulations on cryptocurrency, foreign exchanges are seeking to muscle into the South Korean market that have relatively lax regulations. If the trend continues, the government will face more difficulty in making the domestic cryptocurrency market transparent.”