The Financial Supervisory Service (FSS) of South Korea has summoned five leading crypto exchanges in the wake of just implemented crypto laws, signaling heightened scrutiny of industry practices. This move comes in the wake of aggressive fee hikes by major players in the market, sparking concerns about fair competition and user protection.
South Korea Crypto Exchanges Under Scrutiny
South Korea’s Financial Supervisory Service (FSS) has summoned the country’s five major crypto exchanges which are, Upbit, Bithumb, Coinone, Korbit, and Gopax to address the ongoing controversy surrounding deposit usage fees. This urgent meeting, held on July 24, 2024, comes in the wake of intensifying competition among exchanges to increase their fee rates following the implementation of the Virtual Asset User Protection Act.
The FSS intervention was triggered by Bithumb’s announcement on July 23 to raise its usage fee rate from 2.2% to 4.0% per annum, a decision that was later withdrawn. This move came after a series of fee hikes by various exchanges since the Act’s implementation on July 19-20, with Upbit increasing its rate from 1.3% to 2.1%, and Korbit following suit with an increase to 2.5%.
Financial authorities deemed Bithumb’s 4% rate as potentially unreasonable, citing Article 5 of the Virtual Asset Industry Supervision Regulations. This article mandates that deposit usage fees must be “reasonably calculated” based on operating income and incurred expenses.
During the meeting, the FSS aimed to re-examine the calculation methods for deposit usage fees and address disagreements among exchanges regarding reasonable fee levels. South Korea Crypto Exchanges were required to provide detailed information on their deposit management practices and fee calculation methods.
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Broader Regulatory Landscape and Future Implications
The deposit fee controversy is part of a larger regulatory shift in South Korea crypto market. The FSS had previously announced plans for a system to monitor unusual crypto trading activity, requiring exchanges to provide detailed data. This aligns with the newly implemented Virtual Asset User Protection Act.
Simultaneously, the Digital Asset Exchange Alliance (DAXA) has initiated a comprehensive review of over 1,300 digital assets to ensure compliance with new legislation. This review, while not a mass delisting effort, could pose challenges for altcoins struggling to meet regulatory standards.
The FSS guidelines have set clear parameters for identifying suspicious trading activities, including abnormal volume and price ranges, large transactions, and slow execution. Non-compliance could result in severe penalties, signaling a new era of stringent oversight in South Korea crypto market.
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