South Korea’s regulatory crackdown could result in the closure of two-thirds of the country’s cryptocurrency exchanges, and the move could be contributing to the weakness in Bitcoin (CRYPTO: BTC) and other cryptocurrencies.
What Happened: South Korea’s financial watchdog, the Financial Services Commission, has set a deadline of Sept. 24 for exchanges to register with the Financial Intelligence Unit in order to continue operating legally, Bloomberg reported.
Korea’s four biggest cryptocurrency exchanges, including Upbit and Bithumb, have registered as legal trading platforms and account for nearly 97% of the country’s trading volume, as per the report.
However, the crackdown could reportedly result in the closure of almost 40 of the more than 60 cryptocurrency exchange operators in South Korea. It would also eliminate “Kimchi coins,” altcoins that are issued and traded on these exchanges primarily by Koreans, but mostly lack intrinsic value.
The regulatory overhaul could result in losses of 3 trillion won or $2.6 billion to investors in the Kimchi coins, as per the report that cited an estimate by the Korea Society of Fintech Blockchain.
Why It Matters: South Korea’s crackdown on the cryptocurrency sector, which comes amid the rising scrutiny of cryptocurrencies globally, is part of the government’s efforts to curb the frenzied buying of cryptocurrencies by investors.
The volatile trading in digital currencies is also believed to be hurting the investments of young Koreans, who are struggling with high unemployment and skyrocketing home prices. It has also raised concerns about potential illegal activities.
price Action: Bitcoin is down 1.1% during the past 24 hours, trading at $47,882.06 at press time.
Bitcoin regained the crucial $50,000 level in late August but has fallen below that level again. The apex cryptocurrency is down almost 26.2% from its all-time high of $64,863.10 reached in April.
The overall cryptocurrency market capitalization has dropped 2% over 24 hours to $2.14 trillion.
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