South Korean crypto-only exchanges on the brink of closure

In the face of a crypto trading ban imposed in 2021, the cryptocurrency market in China continues to thrive, defying the odds, according to a recent report from Kyros Ventures. Regional survey and reportThe Vietnam-based blockchain-focused startup incubator and venture capital firm has presented its report findings, shedding light on the unique dynamics of the Chinese crypto landscape compared to neighboring countries such as South Korea, Vietnam, Taiwan and Thailand. The survey was conducted in December in collaboration with 10 media agencies across the region, involving over 5,000 participants to gauge their sentiments and investment patterns.Photo by Road Trip with Raj on UnsplashGreater crypto interestMore than 70% of respondents revealed that cryptocurrencies accounted for over half of their asset portfolios. Among survey respondents in China, 88.9% reported heavy investments in cryptocurrencies, surpassing the enthusiasm observed in Vietnam, South Korea, Taiwan and Thailand. The finding is surprising, given that cryptocurrency trading is prohibited in China, while in the other jurisdictions the same level of restrictions is not in place. China's crypto scene faces substantial regulatory hurdles, with a government ban on crypto trading implemented in 2021. Despite this, the report highlights that a majority of Chinese investors opt for centralized crypto exchanges (CEXs) for their trading activities. Arthur Hayes, the founder of crypto derivatives platform BitMEX, recently outlined that wealthy individuals in China have access to international banking, and with that, access to overseas cryptocurrency platforms through the Chinese autonomous territory of Hong Kong. An investigative report produced by the Wall Street Journal in 2023 found that leading global crypto exchange Binance continues to have a thriving business relative to its Chinese user base. The Chinese authorities appear to be aware that the crypto trading prohibition that has been applied by the government is being flouted. This is demonstrated by the fact that the government is looking to update its anti-money laundering rules for the first time in 17 years to account for the rise in cryptocurrency investment, trading and use. Higher risk appetiteNotably, 33.3% of Chinese investors indicated an allocation to stablecoins. That is indicative of a greater risk appetite in China by comparison with countries like South Korea and Vietnam where 43% and 59% of respondents had money allocated in risk-off stablecoin positions. In terms of investment by referral, Thailand and China emerged with the highest rates, reaching up to 80%. Previous research carried out by Kyros earlier in 2023 highlighted the significance of crypto investment via referrals within the Vietnamese market. Developing regional regulatory landscapeThe regulatory landscape in Asia witnessed significant developments in 2023, with Hong Kong emerging as a leading hub for crypto and Web3 innovation. The issuance of cryptocurrency exchange licenses in Hong Kong marked a pivotal moment for the industry in the region. In South Korea, new legislation aimed at protecting cryptocurrency users, enhancing transaction transparency and fostering market discipline was enacted. Meanwhile, Taiwan's Financial Supervisory Commission explored the possibility of allowing crypto exchange-traded funds, pending a thorough analysis of the product's development in global markets.  

While cryptocurrencies may be banned in China, crypto trading activity continues in some corners, nonetheless, sometimes through accessing overseas exchanges. With that, authorities recently uncovered a massive underground banking operation that exploited crypto trading platforms to evade local forex regulations.Photo by Manuel Joseph on Pexels$2.2 billion laundering operationOn Sunday, an account on popular Chinese social media platform WeChat run by China’s State Administration of Foreign Exchange (SAFE) published details of the $2.2 billion laundering operation bust. Xu Xiao, the Inspector at the Qingdao Branch of the State Administration of Foreign Exchange, revealed that the scheme involved underground banks who purchased virtual currencies and then sold the virtual currencies through overseas trading platforms to obtain the foreign currency they needed. This process, he explained, completes the conversion of yuan and foreign currencies, constituting the illegal act of buying and selling foreign exchange. Stringent capital controlsChina enforces stringent rules on money transfers outside the country. Citizens are limited to exchanging up to $50,000 in foreign currency and require a permit for transactions beyond that limit. Any transaction exceeding the limit without a permit is considered money laundering. During a recent investigation, authorities seized cryptocurrencies valued at approximately $28,000 in Tether, Litecoin and other digital currencies. However, the operation is estimated to have facilitated the movement of over $2.2 billion, involving more than a thousand bank accounts across 17 provinces and municipalities. Monetary control loopholesChina, once the largest cryptocurrency market, imposed a comprehensive ban on crypto exchanges in September 2017 and subsequently expanded its restrictions to include crypto mining and trading. Despite these measures, reports have surfaced about underground crypto exchange operations. Earlier this year, an investigative report by the Wall Street Journal found that global exchange Binance continues to do thriving business with Chinese customers. Global crypto exchanges are reportedly still onboarding Chinese clients indirectly. The South China Morning Post (SCMP) recently accused Binance of facilitating Chinese crypto trading accounts by falsely claiming they are from Taiwan. While mainland China adopts a hostile stance towards cryptocurrencies, the special administrative region of Hong Kong remains progressive in the sector. Hong Kong’s regulatory authorities have introduced specific rules for cryptocurrencies and are licensing crypto exchanges operating within the jurisdiction. Arthur Hayes, the co-founder of the BitMEX crypto derivatives platform, recently described Hong Kong as the gateway for mainland China to global capital markets. Hayes asserted that wealthy Chinese individuals all bank in Hong Kong and with that, they all have access to crypto exchanges and brokers. In Cambodia, it is understood that illicit Chinese-linked activities oftentimes implicate the use of U.S. dollar stablecoin Tether (USDT) to move funds in and out of China even though Tether is banned in Cambodia. The latest crackdown in China underscores the ongoing challenges faced by authorities in controlling crypto-related activities, highlighting the dynamic nature of such activity within and adjacent to mainland China. As regulatory scrutiny intensifies, the contrast between mainland China’s approach and Hong Kong’s more open stance toward cryptocurrencies becomes increasingly evident. 

One of South Korea's prominent cryptocurrency exchanges, Bithumb, has doubled down on its effort to solidify its position as a leading crypto trading platform in the country. Bithumb has recently announced its policy to offer the lowest withdrawal fees among all local crypto exchanges, while enhancing its user experience by upgrading the user interface (UI) and adding more features to its app, according to the local media outlet Kyunghyang Games.  Already one of the few qualified fiat-to-crypto exchanges in Korea and a member of Digital Asset eXchange Alliance (DAXA) – a consultation group of the top five local crypto exchanges – Bithumb aims to further strengthen its competitiveness in the market. Photo by Traxer on UnsplashLower withdrawal fees with trading fees already at 0.04%According to the press, Bithumb has announced to offer the lowest withdrawal fees in the local crypto scene to win the hearts and minds of investors. Under the updated fee policy, users are now charged 0.0008 BTC for withdrawing Bitcoin and 0.009 ETH for Ether. The exchange has also been known for offering one of the lowest trading fees at 0.04%.  Making the deposit limit increase easierBithumb has long been getting complaints from users over its relatively unfavorable user experience and cumbersome processes required to increase the deposit limit of their real-name accounts. In response, Bithumb has introduced a new in-app feature that simplifies such procedures, so that users can raise their deposit limit with ease.  Among users who joined Bithumb in March, those whose initial deposits have passed 30 days and who purchased crypto assets valued at over KRW five million ($3,700), are now eligible for the deposit limit raise, allowing them to deposit and withdraw up to KRW 500 million per day.  Enhanced user interface and user experience One of the newly added features is the "Even Faster Chart," which provides users with four times faster response times following its transition from "Web view" to "Native view."  Bithumb's Chief Operating Officer (COO), Moon Seon-il, stated that the exchange is improving its service in multiple ways, including offering the lowest fees, supporting multichain transactions and enhancing UI for users.