South Korea: Exchanges face problems amidst uncertain regulations
The lack of regulatory certainty in South Korea is causing major Korean exchanges to lose international traders and focus on the domestic public.
In a conversation with Bitcoin Method, a representative of the cryptoexchange Upbit expressed concern about the problems faced by their platform in providing their users with fiat-to-crypt trading service:
„Offering the fiat currency trading service through verified bank accounts has been a crucial issue for us since we have not been able to maintain the service for more than two years.“
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A new partnership as a temporary solution
To try to solve the problem, on June 23rd Upbit partnered with K Bank, which only operates on the Internet. The official said that this new partnership will allow them to resume fiat currency trading for South Korean users.
However, users from other countries will probably not be able to use this feature, since Korean banking regulations do not allow foreigners to open an online bank account.
With the new partnership replacing the previous one with the Industrial Bank of Korea, Upbit’s non-Korean traders are required to withdraw their fiat funds from the exchange by July 24.
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The Upbit representative said: „Ensuring compliance is obviously very important to us, but the fact that foreigners cannot trade through K Bank was not a determining factor in the partnership.
Other Korean exchanges, such as Korbit and Coinone, also integrated an authentication process that requires a domestic mobile phone number. This automatically eliminates foreign traders from using these two services.
Preparing for a 20% Tax
Since June, non-resident Upbit traders pay 22% of their profits to the exchange when they withdraw their funds. The goal is to ensure that the platform can easily pay taxes when the state implements new regulations.
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Upbit’s spokesman reflected on the same comment:
„A 20% tax has been proposed by lawmakers, but there has been no official announcement from the South Korean Ministry of Economy and Finance. It is difficult to calculate the impact on exchanges like Upbit until we know the details of the new tax guideline.“
He further clarified that if the amount of taxes collected by the government is less than they expect, the exchange will make the corresponding refunds.