New regulation in South Korea has forced several exchanges to close

[paxmao]

https://fortune.com/2021/09/17/south-korea-crypto-exchange-shut-down-bitcoin-regulation/

The regulation coming into place this week places unbearable compliance demands on crypto exchanges up to the point of only three of these being able to fully comply. SK is one of the countries where people have participated in crypto to a much higher degree than in most and this is not good news. Still, some of the exchanges remain open.

In 2022, the government will also introduce a crypto capital gains tax; investors who make over $2,135 in trading profit will face a 20% tariff.

[1714048365]

1714048365

[Strongkored]

Crypto exchange will always be the target of the government not only in South Korea but there will definitely be other countries that will regulate it, the circulation of money in it may be main target, this is the example They must also partner with banks to ensure real-name accounts.

[NeuroticFish]

this is the example They must also partner with banks to ensure real-name accounts.

Woah, I'm sure that if this is for real, it can be easily attacked by some smart lawyers.
I mean, if I have a successful business I have to partner with another private business only for the sake of it? This must be incorrect. Why would I help another private business? It's my business, I have to find the ways for enforcing KYC - maybe with the help from another company, or maybe not. It should be my decision...

[Charles-Tim]

I was surprised to read SK Won is the third traded fiat-to-crypto with the highest trading volume while the US Dollar and the Pounds are the first and second respectively.



Also, I was surprised to see upbit having 80-90% or more of the SK crypto trading volume, while the first 4 exchanges have more than 90-95% or more of the country's crypto trading volume.

The regulation coming into place this week places unbearable compliance demands on crypto exchanges up to the point of only three of these being able to fully comply.

Never mind me, I have read the news, but four exchanges were included to have complied, or is there anything I am still missing?

In 2022, the government will also introduce a crypto capital gains tax; investors who make over $2,135 in trading profit will face a 20% tariff.

Which means it will be imposed on the rich people in the country or anyone that has such huge profit. We hope capital loss will also still be deducted first as the net result before the capital gain is calculated.

By Sept. 24, all exchanges operating in South Korea must obtain licenses from financial and Internet regulators. As of Monday, only 28 exchanges—out of the 63 operating in-country—had received certification from the Korea Internet and Security Agency (KISA), the first step to obtaining final approval from the Financial Services Commission (FSC). The remaining 35 exchanges are unlikely to be able to comply given the looming deadline, says the FSC.

In March the FSC, under Eun’s direction, introduced new rules stipulating that domestic and foreign crypto exchanges must be vetted by the Financial Intelligence Unit (FIU) before their applications are passed on to the FSC. To win FSC approval, crypto platforms must require users to register using their real names and bank accounts. Platforms also need to meet anti–money laundering standards by having their information security systems certified by the government’s Internet watchdog.

Only four of South Korea’s platforms, Upbit, Bithumb, Coinone, and Korbit, have submitted their registrations to the FIU, meaning that they have secured both bank partnerships and certification from the Internet regulator.

[fiulpro]

https://fortune.com/2021/09/17/south-korea-crypto-exchange-shut-down-bitcoin-regulation/

The regulation coming into place this week places unbearable compliance demands on crypto exchanges up to the point of only three of these being able to fully comply. SK is one of the countries where people have participated in crypto to a much higher degree than in most and this is not good news. Still, some of the exchanges remain open.

In 2022, the government will also introduce a crypto capital gains tax; investors who make over $2,135 in trading profit will face a 20% tariff.

South Korean government did create problems for cryptocurrencies like bitcoins in the past as well, but I thought they will be over with that soon, at the same time introducing such taxes not only sends a strong greedy message to the users but also it's not right to increase it so suddenly, there are countries where the taxes are 20% for sure but I do think that since bitcoins and cryptocurrencies are not really something born out of the governmental bodies they should not be something they should earn from but then again some of them do provide the people with protection against frauds and also legalize the cryptos as well, so maybe it might be good to introduce some reasonable tax not sure if it would be a good idea to push the market away suddenly since for the long term they would be making more money if more people would be engaged in it. Maybe they also wanna introduce their own, digital currency as well.

[Hydrogen]

The newly imposed strict reporting requirements, seem identical to the ones many americans have grown sick of.

A trend which could be related to americans renouncing citizenship in record numbers, immigrating to countries with low income taxes and none of the strict reporting requirements of countries like the USA and now south korea.

Wealthy Americans Are Renouncing Citizenship In Record Numbers

The number of Americans who renounced their citizenship hit a record high in 2020 and has continued to increase in 2021.

Andrew Mitchel, an international tax attorney who tracks the numbers, found there were 6,707 individuals who renounced their U.S. citizenship in favor of a foreign country in 2020, Axios first reported Thursday. That number is a 237% increase compared to 2019 and considerably higher than any year dating back to 1998.

https://dailycaller.com/2021/08/05/wealth-americans-renounce-citizenship-record-numbers/

The Biden administration (and their allies) failed to pass "minimum tax requirements" for the entire world earlier in 2021.

It looks as if they're still trying to expand their tax hike and strict reporting policies across the entire world on a nation by nation basis.

[The Sceptical Chymist]

In 2022, the government will also introduce a crypto capital gains tax; investors who make over $2,135 in trading profit will face a 20% tariff.

Which means it will be imposed on the rich people in the country or anyone that has such huge profit. We hope capital loss will also still be deducted first as the net result before the capital gain is calculated.

$2135 isn't really that much money for a lot of crypto traders, especially over the course of a year (which is what I assume the language of the regulation means).  So that tariff doesn't target only wealthy crypto investors/traders at all--and I think it's ridiculous, even though 20% is probably lower than capital gains taxes on stock trades (though I don't know that for sure).  Governments are constantly trying to figure out how many pockets you have so that they can stick their octopus hands in all of them.

Is SouthXchange based in S. Korea?  I'm pretty sure it is, and I wonder if they're going to comply with these regs or if they're going to close up shop.

[haidil]

Is this thread appropriate in the altcoin discussion section?
I hope the current price decline is not affected by the South Korean policy. Maybe they've always made pretty authoritarian rules. But previously the South Korean government had funded their military from the proceeds of Crypto theft which was funded by the government there. They just take the opportunity in adversity.

[Coyster]

Regulators say crypto scams in South Korea are becoming bigger and more frequent, aided by the industry’s rapid growth.

The above is an excerpt from the link in the op, and it's basically clear that Governments will continue to impose regulations, sanctions and bans under the pretext of attempting to challenge and quell crypto scams, when actually they are trying their possible best to have some sort of control over the network and limit its growth which is proving futile, the thing is, I expect this regulations to continue and it's very comfortable for the government to have some sort of control over crypto through centralized exchanges, as the exchange holds possession of users info/data.

Imo, this could be a calculated move to make life difficult for crypto exchanges, and by extension its users, to prolly kick some of them out of business or without choice force them to bend to their new rules, I mean, it's not like fiat crimes and scams have been replaced with crypto scams but the government is making it feel that way; I really do not have high hopes that governments in time to come will be receptive to dex crypto, it's clear they are obsessed with control and want to smother any form of freedom of funds their citizens can get.

[arallmuus]

and I think it's ridiculous, even though 20% is probably lower than capital gains taxes on stock trades (though I don't know that for sure).  Governments are constantly trying to figure out how many pockets you have so that they can stick their octopus hands in all of them.

The tax rate is almost the same for stock trades.

The basic tax rate will be 22% (including local income tax), but the government is authorised to apply a flexible tax rate of 11% for stocks transferred on or after 1 April 2018. Gains from derivative transactions will be separated from other income and will be eligible for a basic deduction (KRW 2.5 million a year)

Source : Here

I think that this is one of the way for the South Korea Government to discourage crypto trading in their country considering that there is 11 bilion usd worth of transaction in upbit alone so yeah they will try to milk as much as they can from traders. Expected move from goverments though, if they cant do anything to crypto then applying hefty tax rates should do the job

[Fortify]

https://fortune.com/2021/09/17/south-korea-crypto-exchange-shut-down-bitcoin-regulation/

The regulation coming into place this week places unbearable compliance demands on crypto exchanges up to the point of only three of these being able to fully comply. SK is one of the countries where people have participated in crypto to a much higher degree than in most and this is not good news. Still, some of the exchanges remain open.

In 2022, the government will also introduce a crypto capital gains tax; investors who make over $2,135 in trading profit will face a 20% tariff.

It looks like the wind is blowing against cryptocurrency. The regulators in countries around the world are finally realizing that massive amounts of money is being made and moved among these exchanges. For any real long term buyer, it should actually be a good thing because you'll be able to build up your holdings as the price comes down. We saw a few months ago a flash crash happened when there was just a rumor of the US banking regulator taking action and Europe is likely to be even more strict. Considering Bitcoin has only been around and popular for less than 10 years, there is still many more laws to be written around it and politicians are always looking for easy fund raising targets - what better than a currency bought by younger generations who are less likely to vote anyway.

[Slow death]

I read and reread this article and I confess that I cannot understand why the Korean regulator requires exchanges to have partnerships with banks and at the same time empowers banks to reject or not partner with exchanges, we all know that the owners of banks are people from the political parties that most of the time govern the country and if the government is not liking cryptocurrencies, the banks will also not like cryptocurrencies because the banks follow what the government says or opines. i think this south korean behavior is typical behavior of someone who doesn't want cryptocurrencies in their country

[paxmao]

this is the example They must also partner with banks to ensure real-name accounts.

Woah, I'm sure that if this is for real, it can be easily attacked by some smart lawyers.
I mean, if I have a successful business I have to partner with another private business only for the sake of it? This must be incorrect. Why would I help another private business? It's my business, I have to find the ways for enforcing KYC - maybe with the help from another company, or maybe not. It should be my decision...

Anything that is related to finance and trading is strongly regulated and these regulations vary a lot between countries. Believe or not, insider trading is allowed in Russia for example, but, in theory, the SEC throws people in jail for it.

...
Never mind me, I have read the news, but four exchanges were included to have complied, or is there anything I am still missing?

In 2022, the government will also introduce a crypto capital gains tax; investors who make over $2,135 in trading profit will face a 20% tariff.

Which means it will be imposed on the rich people in the country or anyone that has such huge profit. We hope capital loss will also still be deducted first as the net result before the capital gain is calculated.

...

You are not missing anything I think, there are just 4 exchanges of the possible tens existing. You do not have to be rich to make 2k in profits. Most traders make that in profit, before losing it after of course

[bittraffic]

A lot of things happening in crypto just today from the fud Binance server to scary South Korea crypto regulation. Crypto Capital gain tax is not going to attract more investors in crypto, this is a crackdown on investors and crypto businesses as well that is why they are making sure the names in cryptocurrency exchanges match the bank accounts.

[Charles-Tim]

$2135 isn't really that much money for a lot of crypto traders, especially over the course of a year (which is what I assume the language of the regulation means).

You are not missing anything I think, there are just 4 exchanges of the possible tens existing. You do not have to be rich to make 2k in profits. Most traders make that in profit, before losing it after of course

To be candid, I do not know much about how capital gain tax is calculated accurately which could also be differ from country to country. Only what I read about it few months ago is that it is deducted from the profit made either while converting crypto asset to another crypto asset or the profit made while converting crypto asset to fiat. That was the reason I implied the rich people would be the ones that will likely be in the category and also people that are lucky during volatile price trends that favour holding or the position opened. If it is calculated annually, even the average people will also most fall in the category of people that will be taxed, but if calculated on position opened in each trade, maybe the rich will fall more into the category. I may not be absolutely correct.

Is SouthXchange based in S. Korea?  I'm pretty sure it is, and I wonder if they're going to comply with these regs or if they're going to close up shop.

Yes, they are exchanges based in South Korea, but maybe they can just follow what CZ did to Binance, CZ got not option again than to leave China, but those exchanges are very small exchanges in trading volume, the first four exchanges have over 90% or even over 95% of the total trading volume, so this could be hard for small exchanges to follow.

According to what I read from the news, the banks are not ready to partner with small exchanges, if the banks did not partner with them, likely they will close up as you commented.

In March the FSC, under Eun’s direction, introduced new rules stipulating that domestic and foreign crypto exchanges must be vetted by the Financial Intelligence Unit (FIU) before their applications are passed on to the FSC. To win FSC approval, crypto platforms must require users to register using their real names and bank accounts. Platforms also need to meet anti–money laundering standards by having their information security systems certified by the government’s Internet watchdog.

The rules force the exchanges to partner with traditional banks, which have the final say in confirming the partnership. Banks bear the risk if the funds are used for financial crimes so they have been unwilling to partner with smaller exchanges that lack the resources to implement stringent anti–money laundering systems. On Friday, the sixth-largest exchange, Huobi Korea, announced that it had suspended Korean won trading owing to its inability to obtain a bank partnership.

All I can see now is how cryptocurrencies are getting more centralized while it is normally not centralized in design, but if not using exchanges for trading, holders can hold on noncustododial wallets.

[Kittygalore]

I read and reread this article and I confess that I cannot understand why the Korean regulator requires exchanges to have partnerships with banks and at the same time empowers banks to reject or not partner with exchanges, we all know that the owners of banks are people from the political parties that most of the time govern the country and if the government is not liking cryptocurrencies, the banks will also not like cryptocurrencies because the banks follow what the government says or opines. i think this south korean behavior is typical behavior of someone who doesn't want cryptocurrencies in their country

That's exactly the reason for that, the banks have political friends and they want to protect their interest as much as they can even if they have to pay or bribe these politician friends. It's not yet the end for the crypto scene in South Korea though, they will still find ways to make things in their favor despite being against the odds with the government itself.

[stompix]

Woah, I'm sure that if this is for real, it can be easily attacked by some smart lawyers.
I mean, if I have a successful business I have to partner with another private business only for the sake of it? This must be incorrect. Why would I help another private business? It's my business, I have to find the ways for enforcing KYC - maybe with the help from another company, or maybe not. It should be my decision...

The lawyers will not do be able to do a thing, it's just like here in the EU, every business must have a  bank account for operations, same will be applied here, with the small difference that they will not permit any more deposits and withdrawals from other accounts with a punishment this time, not just tax evasion (if proven).
It was common practice for exchanges to operate with personal accounts in order to hide cashflows and avoid taxation, now they if they try this is going to hurt them a lot.

The FSC discovered the bogus accounts after examining a total of 94 accounts run by 79 virtual asset exchanges, according to the press release.

It's not just about the users, the exchanges themselves are targeted.

Which means it will be imposed on the rich people in the country or anyone that has such huge profit. We hope capital loss will also still be deducted first as the net result before the capital gain is calculated.

That's below the average monthly wage for Korea,  I think this might fit the first tax bracket for them, I'm not familiar with their tax system but this might be the minimum value for zero tax earnings.
So no, it's not by any means aimed at taxing the "rich", it will end up taxing almost everyone who makes a profit.

Yes, they are exchanges based in South Korea, but maybe they can just follow what CZ did to Binance, CZ got not option again than to leave China,

then Japan, then Malta, and so on and on, and even he had no choice but to actually remove all the Korean won pair and even the Korean language from Binance.

[Ucy]

I wonder if this affects S. Koreans who use foreign exchanges,... if not, I guess rather than closing down, the exchangea should seek for licenses to operate in other countries, then the people from the country could continue with them..
I couldn't access the article in order to properly understand the issues/demands.

[NeuroticFish]

The lawyers will not do be able to do a thing, it's just like here in the EU, every business must have a  bank account for operations, same will be applied here, with the small difference that they will not permit any more deposits and withdrawals from other accounts with a punishment this time, not just tax evasion (if proven).

While banks were in the law for handling the money, now they're there to prove ownership of accounts / enforce KYC.
In my brain these are different things. It's only the banks who can do such checks? I guess not. And if so, why are the partnership enforced with banks and not any kind of company that can do such tasks? And what if the business can create its own department for handling this? Sorry, I may be missing something, but for me this enforced partnership is not normal.

Yes, they are exchanges based in South Korea, but maybe they can just follow what CZ did to Binance, CZ got not option again than to leave China,

then Japan, then Malta, and so on and on, and even he had no choice but to actually remove all the Korean won pair and even the Korean language from Binance.

Indeed. And it's becoming harder to harder to keep the business running while it's on the run. After the Binance experience it's to be expected that the countries will only get better in avoiding/banning this kind of practices.

[michellee]

I wonder if this affects S. Koreans who use foreign exchanges,... if not, I guess rather than closing down, the exchangea should seek for licenses to operate in other countries, then the people from the country could continue with them..
I couldn't access the article in order to properly understand the issues/demands.

Hopefully, that will not impact bitcoin price globally or if that impacts the price, it will not have a big impact. But maybe this situation is related to that news since the bitcoin price now is down a lot. I wonder what those people will do if many exchanges have been forced to close their businesses. But I think those people will trying to search for the other exchanges and use that exchanges to continue trading. But I think those exchanges will not want to close their exchange and will try to fill the requirement from the government to run their business.