South Korea has recently implemented new supervisory fees for cryptocurrency exchanges, impacting major players such as Upbit and Bithumb. These regulations, set to take effect next year, require exchanges to pay these fees as part of updated guidelines announced by the Financial Services Commission on July 1. The new rules are outlined in the revised ‘Enforcement Decree of the Act on the Establishment of the Financial Services Commission’ and the ‘Regulations on the Collection of Financial Institution Contributions’.
Under the new regulations, virtual asset operators must pay supervisory fees for inspections conducted by the FSS. The total fee for the top four exchanges is estimated to be around 300 million won ($220,000). Upbit, the largest exchange, is expected to cover over 90% of this amount, approximately 272 million won ($199,592). Bithumb will pay about 21.14 million won ($155,157), while Coinone and GOPAX will contribute around 6.03 million won ($4,422) and 830,000 won ($608) respectively. Korbit is exempt from these fees due to its lower revenue.
These fees essentially create a quasi-tax for financial institutions subject to FSS inspections. Payment of these fees is mandatory for businesses with operating revenue of 3 billion won or more. The swift implementation of these regulations caught many insiders by surprise, as they expected a longer period for preparation. While larger exchanges like Upbit and Bithumb may be able to absorb these costs, smaller exchanges like Coinone and GOPAX, which are currently facing financial difficulties, may encounter additional challenges. It is worth noting that South Korean exchanges are currently experiencing a 30% decline in trading volumes.
In addition to the supervisory fees, the new law also mandates that exchanges store at least 80% of users’ assets in cold wallets. This measure aims to ensure that users’ assets are not commingled with company funds and are adequately protected. Exchanges are also required to review listed assets to ensure compliance with current standards; failure to do so may result in delisting.
These regulatory updates come in the wake of a delay in implementing a 20% tax on crypto gains by South Korea’s Ministry of Economy and Finance. The implementation of this tax may be postponed until 2028, providing some relief to market participants. In the meantime, exchanges in South Korea will need to navigate these new regulations and ensure compliance to continue operating in the rapidly evolving crypto market landscape.