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South Korea’s small crypto exchanges face increasing regulatory heat

Stringent regulatory policies in South Korea could force many small- and medium-sized crypto exchanges out of the country.

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Authorities in South Korea are continuing to propose and enact measures aimed at maintaining strict oversight over the nation’s crypto exchange market. These come amid a significant uptick in cryptocurrency trading volume, especially for altcoins.

In May, South Korea’s Financial Services Commission (FSC) announced that the government is planning to enforce stricter regulatory policies on cryptocurrencies in general. This move comes as virtual asset service providers (VASPs) have been given until September to register with the appropriate state authorities.

Crypto exchanges in South Korea were already under pressure even before this new set of stricter regulatory policies. The requirement for real-name trading accounts has seen smaller- and medium-sized exchanges scramble to secure licenses from commercial banks to no avail, at least as of the time of writing.

Recently, reports have emerged of another policy move from South Korean authorities that could have far-reaching ramifications, even for the “Big Four” crypto exchanges in the country — Bithumb, Coinone, Korbit and Upbit.

FSC shines spotlight on cross trading practice

As previously reported by Cointelegraph, the FSC is planning to ban cross trading on crypto exchanges in the country as part of a raft of stricter regulatory measures for trading platforms. Cross trading is a method used by trading desks to offset buy and sell orders for the same asset without recording the transactions on their order book.

Cross trading, while illegal in many countries, is in some ways a necessary practice for crypto exchanges in South Korea. For one, crypto trading in the country is denominated in Korean won, but fees are collected in cryptocurrencies.

Cross trading offers a solution for South Korean crypto exchanges, allowing them to convert trading fees to Korean won by performing the conversion right on their platform. With the FSC banning the practice, these exchanges may now have a hard time realizing the significant revenue stream that comes from collecting trading fees.

Indeed, the initial responses from some industry commentators to the planned move are that a cross trading ban would serve as a revenue chokepoint for South Korean crypto exchanges. The FSC’s ban, if passed, would mean mandatory zero-commission trading by platforms in the country.

South Korean crypto exchanges charge 0.05% on average as trading fees. This means that in the first quarter of 2021, Upbit raked in almost $9 million in fees daily from a 24-hour turnover of about $17.9 billion. Indeed, the sizable surge in South Korea’s crypto trading volume in 2021 has meant greater fee revenue for platforms.

As early as February, Bitcoin (BTC) turnover for both Bithumb and Upbit was already upward of 11 times greater than the figures recorded for the same period in 2020. Earlier in June, Cointelegraph reported that bank account flows for exchanges in the country were up 40% over the past year.

The revenue growth for South Korean crypto exchanges has even had a trickle-down effect on banking partners and investors. Upbit’s primary banker, K Bank, enjoyed a sharp turnaround in its financial performance and is reportedly targeting 2022 for an initial public offering.

While Bitcoin fever characterized the early crypto trading mania of 2021, the trend pivoted to altcoins as the year progressed. With token prices surging parabolically up until May, South Korean crypto traders seemed to favor smaller-cap altcoins.

Such was the extent of the altcoin trading mania that the Korea Federation of Banks warned of the trend’s potential risks. At the time, the order books of even the Big Four showed BTC trading activity accounting for less than 5% of their 24-hour trading activity, which was significantly lower than the global average for Bitcoin on other platforms.

None of our business, says the FSC

As is often the case with regulatory measures in South Korea, the smaller exchanges might face significantly greater operating difficulties if the FSC’s cross trading ban becomes law. Assuming that platforms will be loath to forgo the revenue from trading fees, South Korea’s cryptocurrency exchanges will have to come up with an alternative.

The most probable alternative would be to create a separate trading desk dedicated to converting crypto trading fees to Korean won. However, any new crypto trading-related venture in South Korea must be registered with FSC’s Financial Intelligence Unit and adhere to strict Anti-Money Laundering (AML) laws.

This registration comes with a significant cost burden that might be too much for the smaller platforms still struggling to meet the September licensing deadline. Another possible option for exchanges would be to partner with loan providers open to accepting crypto as collateral.

Related: South Koreans flock to crypto amid a heavy-handed regulation approach

Regardless of the route chosen, exchanges can ill afford to avoid coming up with a solution to the problem if cross trading is banned by the FSC. Apart from the obvious revenue implications, crypto trading fees also attract withholding tax levies.

For the FSC, this particular problem is one the exchanges will have to solve by themselves. Supporting its decision to pursue a cross trading ban, the commission stated that allowing exchange operators to trade against their customers constitutes a conflict of interest with significant price manipulation risks.

As to the issue of finding alternative means of repatriating trading fees to Korean won, the FSC said: “Whether you want to change cryptocurrency to another asset (other than won) or to keep cryptocurrency, you need to find a solution yourself.”

Is this it for smaller exchanges?

Responding to Cointelegraph’s request for comments, a foreign-media relations spokesperson for the FSC stated:

“As the authorities are currently working on amendments to the relevant law, it would be inappropriate to comment on your questions right now with specific measures still being drawn up. When specific measures are ready for announcement, we will put them up on our website.”

For Lee Chul-ie, CEO of South Korean cryptocurrency exchange platform Foblgate, the proposed cross trading ban is simply another blow for smaller exchanges in the country. Speaking to the Financial Times, Chul-ie remarked: “We are facing an existential crisis. We want to legitimise our business but banks are reluctant to offer us real-name accounts.”

According to the exchange operator, additional problems like cross trading bans could push smaller platforms outside the country or to seek “grey areas” to circumvent stringent regulatory measures.

However, Jeff Kang, South Korea country manager at blockchain security outfit CoolBitX, is of the opinion that some smaller exchanges will be able to manage the situation. In a conversation with Cointelegraph, Kang opined:

“While it appears that increased oversight from the South Korea FSC might be daunting news for the local cryptocurrency industry, the situation is not as dire as it seems. The Korean government’s stance on cryptocurrencies is not to totally stamp out its use, but to account for consumer protection and to eradicate financial terrorism and money laundering.”

According to Kang, the FSC’s goal is not to force exchanges out of the country but to ensure robust AML compliance protocols, adding: “In light of this, cryptocurrency exchanges will have to signal their committed stance to double down on compliance efforts in order to achieve licenses by the September deadline.”

Kang also said that as many as six other exchanges are close to receiving real-name trading account licenses, to bring the total number to 10. However, even if that happens, there will still be over 50 exchanges in South Korea with uncertain regulatory status that will probably be forced to shut down their operations come the September deadline.

For banks, their reticence in dealing with exchanges comes from the fact that financial institutions in South Korea can be held liable for the misdeeds of their cryptocurrency exchange partners.

This situation might be due for a change, with discussions underway between banks and the FSC to limit the liability of commercial banks in the event of any misdeeds committed by their crypto exchange clients. These discussions are also part of a larger agenda that will see banks classify crypto exchanges as high-risk clients.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/south-korea-s-small-crypto-exchanges-face-increasing-regulatory-heat

Blockchain

The GBA Annual Achievement Awards

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In April 2019, during the Guatemalan election, the people of Guatemala suspected that voting fraud had occurred. Since additional elections were scheduled for August 2019, citizens wanted assurance that there would be no fraud in the next election. That was the impetus for Fiscal Digital, a Guatemalan citizen volunteer organization, to utilize a public immutable blockchain for their elections. Against overwhelming opposition, the Organizer of Fiscal Digital, Carlos Toriello Herrerias, was successful in implementing a blockchain-based voting solution in Guatemala. Carlos was the winner of last year’s GBA Annual Achievement Award for Courage.

The Government Blockchain Association (GBA) is pleased to announce that the 2021 Annual Achievement Awards will be happening live in Washington DC, (9/30/2021) as part of Government Blockchain Week. Four awards will be presented in the areas of Leadership, Innovation, Social Impact and Courage. Nominations of individuals deploying exceptional blockchain use will come from around the globe. From securing land titling records, to self-sovereign medical records, to immutable and verifiable voting, blockchain is affecting every industry that transfers value. The winners of these awards are truly making a mark in history, and there is still time to nominate your colleague.

Winners will be awarded by MC Robert Levin of Emergingstar Capital, from a stage in Washington DC in front of a distinguished audience. Receiving a GBA Annual Achievement Award is a credential that can be listed on Linked In, resume’, and any other social media as a recognized global achievement. Do not miss this opportunity to promote the exceptional achievers in your circle. Nominate them for the GBA Annual Achievement Awards today.

Annual Achievement Awards nominations are open until August 15. Winners will be announced from stage in Washington DC on September 30th. All uses of blockchain technology are eligible.

Source: Palto

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Blockchain

Happy birthday Ethereum!

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Today marks the sixth birthday of the Ethereum network and Ether – the world’s second-largest digital asset.

Ethereum was created by the crypto innovator Vitalik Buterin when the project was officially proposed in a white paper in late 2013.

The following January, a 20-year-old Buterin, headed down to the annual North American Bitcoin conference in Miami, Florida, clutching that white paper.

It’s there he met his Ethereum co-founders – a group of Canadian crypto evangelists who immediately saw the huge potential of Buterin’s idea.

Crammed into a little beach house, they invited Buterin to stay and turn his vision into reality.

Within six months, Vitalik had dropped out of the computer science program at the University of Waterloo, and moved out to Zug, Switzerland (now known as crypto valley) along with the rest of the group-turned-team.

The founding members of the Ethereum network included Gavin Wood (Solidity smart contract language creator), Anthony di Lorio (DeCentral founder), Joseph Lubin (ConsenSys founder), and Charles Hoskinson (Cardano founder).

After the completion of an $18m funding round in 2014, development begun and Ethereum slowly materialised as a viable decentralised network.

However, tensions between members set in and the team begun to unravel.

Charles Hoskinson was the first to go, many others would follow.

Today, only Buterin still works on the project.

After a period of successful testing on July 30, 2015 – the first block of Ethereum was mined and the Ethereum mainnet was launched.

The network has rapidly grown to become one of the most prominent components of DeFi and the crypto industry at large. However, a victim of its own success, gas and transaction fees have begun to slow.

This is why Ethereum is now preparing for an imminent scalability update to Ethereum 2.0.

Watch this space.

More crypto news and information

If you want to find out more information about Bitcoin or cryptocurrencies in general, then use the search box at the top of this page. Here’s an article to get you started.

As with any investment, it pays to do some homework before you part with your money. The prices of cryptocurrencies are volatile and go up and down quickly. This page is not recommending a particular currency or whether you should invest or not.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice

 

 

PlatoAi. Web3 Reimagined. Data Intelligence Amplified.
Click here to access.

Source: https://coinrivet.com/happy-birthday-ethereum/

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Blockchain

Binance to halt derivatives and futures trading in Europe

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Binance has officially halted futures and derivatives products offerings across the European region, commencing with Germany, Italy, and the Netherlands. 

The leading cryptocurrency exchange continues to limit products to users amid the ongoing challenges it faces from global regulators.

The move means users from these countries will not be able to open new futures or derivatives products accounts “with immediate effect”. 

Binance confirmed that if existing users have any open positions in these markets, they are advised to close them, noting that a further announcement would be made at a later date to confirm a 90-day period in which to close open positions.

Binance clarified the importance of European markets to their offerings and invited regulators to open a dialogue to discuss the requirements necessary at local levels. The discussion marks Binance’s continued efforts to collaborate with local and national regulators on the necessary requirements to operate in these areas.

“The European region is a very important market for Binance, and it is taking proactive steps towards harmonising crypto regulations, which is a positive sign for the industry,” wrote Binance in a tweet.

Binance also said it does “not actively market Futures and Derivatives Products locally” and that they plan to start “further scaling down” access to these products within Europe. 

The announcement follows Binance’s recent removal of high leverage trading products from its product offerings and a seemingly relentless wave of scrutiny and oversight from global regulators. 

Despite recent efforts to appease regulators by CEO Changpeng Zhao (CZ), Binance has been forced to delist certain margin trading pairs and cease trading and support for stock tokens like Tesla and Coinbase. Binance is also preparing to cut daily withdrawal limits from two Bitcoin (BTC) to 0.06 BTC in August.

Additionally, leading banking institutions and payment processors in the UK have started to limit transfers to and from Binance, citing “excessively high fraud rates” as a key reason for the decision. 

Binance has also been banned in Malaysia and given 14 days notice to shut down its operations. According to an announcement released today, the Securities Commission of Malaysia has issued public enforcement actions against Binance for “Illegally Operating in Malaysia.”

Binance has been given 14 business days from July 26 to comply. The order demands that Binance disables its website and mobile apps in Malaysia alongside ceasing “all media and marketing activities”.

The announcement also mandated Binance CEO Changpeng Zhao to ensure full compliance with the order. Malaysia’s securities regulator also urged citizens to desist from trading with crypto exchanges operating in the country illegally.

Binance-owned exchange WazirX is also being investigated by authorities in India to determine whether it was complicit in alleged money-laundering conducted by betting apps, which collected more than $134 million in the past 10 months. The Enforcement Directorate is investigating allegations that Chinese-operated betting apps laundered a portion of funds through WazirX.

CEO Changpeng Zhao remains optimistic about the future of Binance despite the recent regulatory issues faced by the exchange. He recently disclosed that Binance US, which operates separately from Binance, was looking to go public.

“Binance US is looking at the IPO route,” he said.

“Most regulators are familiar with a certain pattern or having headquarters, having corporate structure. But we are setting up those structures to make it easier for an IPO to happen.”

 

PlatoAi. Web3 Reimagined. Data Intelligence Amplified.
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Source: https://coinrivet.com/binance-to-halt-derivatives-and-futures-trading-in-europe/

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Blockchain

PayPal to launch crypto trading in UK

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PayPal has announced an extension of its cryptocurrency trading platform to UK customers.

This is a significant change of tune by the company, whose former CEO Bill Harris described Bitcoin in 2018 as “a useless payment system, and a ridiculous store of value”.

Now, however, the electronic payment service has slowly begun integrating cryptocurrencies on a large scale, with the moves described as part of an incremental new strategy by new CEO Dan Schulman as he revealed details in his recent Q2 reporting call.

“We continue to be really pleased with the momentum we’re seeing on crypto,” he said.

“We’re going to launch, hopefully, maybe even next month in the UK, open up trading there.”

Trading of crypto assets such as Bitcoin (BTC), Ethereum (ETH), and LiteCoin (LTC) is planned to arrive for UK users by the end of August. Currently, PayPal allows cryptocurrency transactions up to $100,000.

However, PayPal retains control of user’s cryptocurrency in a move reminiscent of traditional centralised financial practices, with no mechanism for transfers to private wallets.

This leads to the ‘not your keys, not your coins’ argument.

Jose Fernandez da Ponte, Vice-President for Blockchains, Crypto, and Digital Currencies suggested this will be a future feature incorporated into the Venmo platform.

Venmo – an easy payment app owned by PayPal – has become a primary facilitator of cryptocurrency trading for the company. The app is popular in the United States, but has made little impact on the British market.

Schulman indicated that Venmo is preferential as it can be used easily in day-to-day commerce, also noting the app’s rapid growth to 70 million users and revenues in excess of 180%.

“We’re also seeing strong adoption and trading of crypto on Venmo,” he added.

“In this quarter, we expanded the Venmo value proposition to allow merchants and consumers to pay for goods and services.”

Crypto in commerce seems to be the predominate focus of PayPal, although its ‘super app’ will operate a centralised trading exchange, this is a competitive space with the likes of DashDirect launching earlier this week.

Automated Clearing House (ACH) sits at the core of PayPal’s market-dominating strategy, allowing vendors and merchants to set-up direct debits to user’s crypto wallets.

“We’re working right now on transfers to third-party wallets, and we really want to make sure that we create a very seamless process for taxes and tax reporting,” Schulman explained.

“And so we’re really looking at how do we integrate that into both the trading and the buy with crypto on our platform.”

Implementation of DeFi products into PayPal’s ecosystem is fundamental to the firm’s potential success in integrating commerce with mass adoption, a fact that doesn’t escape their CEO.

“How can we use smart contracts more efficiently?” he asked in the Q2 call.

“How can we digitise assets and open those up to consumers that may not have had access to that before?”

“There are some interesting DeFi applications as well. And so we are working really hard.”

Needless to say, PayPal’s moves on cryptocurrency are of huge significance for crypto adoption – with the platform representing an easy and widespread point of entry for new crypto users.

More crypto news and information

If you want to find out more information about Bitcoin or cryptocurrencies in general, then use the search box at the top of this page. Here’s an article to get you started.

As with any investment, it pays to do some homework before you part with your money. The prices of cryptocurrencies are volatile and go up and down quickly. This page is not recommending a particular currency or whether you should invest or not.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice

Disclaimer: We do not give advice on financial products.

PlatoAi. Web3 Reimagined. Data Intelligence Amplified.
Click here to access.

Source: https://coinrivet.com/paypal-to-launch-crypto-trading-in-uk/

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