In recent news, South Korean authorities are considering putting an end to cross trading for the various cryptocurrency exchanges within the nation. This development has understandably led many of the local exchanges to become increasingly frustrated as the status of cryptocurrencies remains ambiguous in the country.
Simply put, this ban shall prevent the exchanges from being able to convert the trade fees into fiat funds. Many have speculated that this is just the latest calculated move taken by the authorities for the continued amendments to South Korea’s laws pertaining to reporting on the information of particular financial transactions.
Ban may result in ‘significant disruptions’
As cross trading is already considered to be illegal in numerous jurisdictions, one can imagine why the South Korean authorities would want it to be banned. The process normally includes offsetting various sell as well as buy orders for a specific asset, usually at around the same price, without the need of having the transaction be recorded on the respective order book.
Regardless of the legal status surrounding cross trading, the local cryptocurrency exchange operators present within the country have complained that banning it completely may very well result in drastic disruptions being caused to the current operations, which are already quite strained, to begin with. As such, a number of the operators believe that such a drastic endeavour by the authorities would effectively cause the funds being flowed into the various platforms to be ‘choked’.
When asked about why the exchanges would even consider conducting cross trading, to begin with, the representatives had stated that it is a necessary process that needs to be administered in order to convert the fees which had been charged via cryptocurrency to the KRW (Korean Won).
Authorities remain unfazed
The FSC (Financial Services Commission), for its part, has remained relatively unaffected by the woes of the crypto exchanges and has no plans to adhere to the criticisms. The authorities, therefore, remain adamant that it is the exchanges’ responsibility to ensure that a legal solution is possible, and so relying on questionable means is never going to end well. There is also the fear of price manipulation taking place, which had partly resulted in the FSC’s decision.
Moreover, the previously mentioned amendments shall also involve the exchanges being forced to have a minimum of 70% of the customer deposits be stored in different cold wallets. This step had been implemented in order to protect against the possibility of hackers exploiting the system.