The South Korean government was the cause of major turmoil in the global cryptocurrency market as rumors spread that they were planning to ban cryptocurrency trading across the country. Soon after the news was released, the total cryptocurrency market valuation dropped by almost 50%, causing major financial losses for a lot of traders worldwide. Later, government officials stated that a digital currency exchange ban is only a potential measure for enforcing regulations. Since then, the cryptocurrency market has stabilized at a valuation around $620 billion after having previously fallen to $428 billion. The new regulations are aimed to curb South Korean exchanges from allowing unverified accounts to trade digital assets. Exchanges that do not fully comply with KYC/AML procedures might also be banned by the new regulations.
FOREIGN RESIDENTS BANNED FROM TRADING
South Korea isn’t the only country that has regulated cryptocurrency trading. In late 2017, Chinese regulators forced major exchanges to shut down their operations. The closure of Chinese trading platforms caused a mass exodus of Chinese traders to other exchanges based in South Korea, Japan, Singapore and Hong Kong. A recent article by Trustnodes reported that one of South Korea’s major cryptocurrency exchanges, Korbit, would ban foreign residents from trading cryptocurrencies. The report states:
If you are not a Korean citizen, the KRW deposit to the domestic virtual currency exchange will be stopped when you switch to the new KRW deposit method in January. It applies to both domestic residents and non-residents.
The article suggests that regulators will also plan to limit capital flights through cryptocurrency to $50,000 like capital controls. Experts also believe that the new regulations in South Korea may also force western cryptocurrency corporations to stop their operations in South Korea or even completely leave the country. Analysts believe that more cryptocurrency companies might move from China and South Korea to Japan, a country with more favorable cryptocurrency and blockchain regulations.