Two months after the notification system of virtual asset (cryptocurrency) exchanges was implemented, it was found that the trading volume of coin market exchanges, which only support inter-coin transactions, fell by about 90%. There is a sense of crisis that some of these exchanges may fail because the banking sector is still reluctant to issue a real-name confirmation deposit and withdrawal account, which is a prerequisite for the operation of the KRW market where coins can be traded in KRW.
In accordance with the revised Financial Information Act on Specified Transactions, 29 cryptocurrency exchanges submitted business reports to the Financial Information and Analysis Unit (FIU) under the Financial Services Commission on September 24. Among them, four exchanges, Upbit, Bithumb, Coinone, and Korbit, support KRW-to-coin transactions, and 25 exchanges, including Gopax and Huobi Korea, trade based on representative virtual assets such as Bitcoin. A report was submitted to the ‘Coin Market’ exchange.
According to CoinGecko, a cryptocurrency information site, on the 24th, eight exchanges, including Flybit, Gdac, Aprobit, Probit, Gopax, Huobi Korea, Hanbitco, and Pigeon Wallet, can check transaction volume statistics among 25 coin market exchanges. As of 8:00 pm on the 22nd, the 24-hour transaction amount was $92.68 million (USD). It plunged 88.2% from $790.18 million on September 1, before the won market was closed.
By exchange, Gdac showed the largest decline at 99.9%, followed by ProBit (99,1%), Flybit (98.3%), Gopax (94.9%), and AProbit (87,8%). this was great Huobi Korea decreased to 32.6%, making relatively good progress.
On September 25, right after the end of the KRW market, the 24-hour trading volume of these eight exchanges was $88.12 million. The transaction value increased by $4.56 million on the 22nd, which is believed to be the result of the Bitcoin price jump from $42,446 to $57,326.
The crisis of the coin market exchange was a foreseeable result. Unlike the won market, where you can buy and sell cryptocurrencies in won, in order to trade in the coin market, you must purchase representative coins such as Tether, Bitcoin, and Ethereum from the won market and then transfer them through your wallet. Conversely, in order to realize profits in KRW, the representative coin must be moved to the KRW market and sold. As the procedure has been added one step further, the incentive for users to visit the coin market decreases.
In the case of Hanbitco, the fluctuation of trading volume was smaller than that of other coin market exchanges, as it did not support KRW trading before the business report. As of the 22nd, Hanbitco’s trading volume was $25.44 million, a decrease of only 10.5% from September 1.
The main source of revenue for exchanges is commissions generated from transactions, so if the trading volume drops, profits will inevitably decrease. For this reason, coin market exchanges are aiming to convert to the KRW market by receiving real-name confirmation deposit and withdrawal accounts from banks.
However, as banks are reluctant to issue issuance due to risks related to money laundering, it is difficult to convert to the won market. A local bank with a large incentive to attract customers was mentioned as a relief pitcher, but it is said that they have recently turned to a passive attitude due to ‘travel rules’ etc.
Travel Rule is a regulation under the Special Act that requires both sender and recipient information to be collected when moving coins between cryptocurrency exchanges. All exchanges must establish a related system by March 25 next year.
The related industry believes that negotiations with the bank will not be possible until March of next year, when the travel rule system is completed. In this process, some small and medium-sized companies may close their business due to business difficulties.
A coin market exchange official said, “Both regional banks and Internet-only banks are reluctant to partner with exchanges under real names. I think I can do it,” he said.
As of the 22nd, the 24-hour trading volume of the Big 4 KRW market exchanges was $9.6768 million, a decrease of 27.4% from $13.33 billion on September 1. As the price of Bitcoin rose, it increased significantly compared to $6.197.25 million on September 25.
There are a total of six exchanges that have received business reports from the FIU by the 23rd, including Upbit, Bithumb, Coinone, and Korbit, four exchanges in the KRW market, and Flybit and Gdac. FIU President Kim Jeong-gak attended the ‘International Conference on the 20th Anniversary of the Establishment of Financial Information Analysis Institute’ held at the Lotte Hotel in Sogong-dong, Seoul the day before (23rd) and said, “By the end of the year, the reporting process for virtual asset operators will be completed and the anti-money laundering system and terrorism funds will be fully implemented. We will strictly conduct inspections and supervision of the fulfillment of the procurement ban obligation,” he said.
