Closing of small and medium-sized exchanges… ‘Travel rule’ risk

Small and medium-sized virtual asset exchanges that do not meet the requirements for real-name accounts are shutting down. Recently, a visitor is receiving a consultation at the customer center of the cryptocurrency exchange Bithumb located in Gangnam-gu, Seoul.

As the price of cryptocurrency recently rebounded, the trading volume of domestic virtual asset exchanges is also swaying again. But the exchange is ‘crying’. As the government’s announced deadline for registering a virtual asset exchange business (September 24) is about a month away, small and medium-sized exchanges that do not meet the registration requirements such as a real-name account are closing one after another. The atmosphere at large exchanges with real-name account requirements is the same. It is still unclear whether the report will be accepted or not, and there are growing calls to strengthen the risk assessment of exchanges recently.

According to the virtual asset exchange industry, it is known that many of the 79 domestic exchanges have virtually stopped operating. David, Coin2X, and Bitpoint Plus cannot access the site at all, while the CM Exchange is only accessible, and cryptocurrency trading is no longer possible.

As of August 12, the trading volume of New Dream Exchange was 0 won for 24 hours and Kdex was only 120 million won, which is equivalent to virtually no trading.

The situation is not good for the so-called ‘four major exchanges’ such as Upbit, Bithumb, Coinone, and Korbit. It is not certain whether the extension of the real-name account contract will be successful, and tensions are rising as the issue of ‘travel rules’ has recently surfaced.

Travel rules are FATF regulations that require virtual asset operators to know the sender and receiver information when transferring coins to another exchange or wallet. The revised Enforcement Decree of the Special Act also stipulated that each virtual asset exchange should have travel rules, but the industry’s argument that more time is needed to build the related system was accepted, so the application was postponed until March next year.

▶ Increased number of exchanges that cannot access the site… Coin exchange rate

However, the mood has changed recently when NH Nonghyup Bank asked Bithumb and Coinone to ‘suspend deposits and withdrawals of coins to other exchanges until the travel rules are established’. Although Bithumb and Coinone are realistically unable to block coin deposits and withdrawals right away, it is difficult to ignore Nonghyup Bank’s demands. This is because they are in a situation where they need to get a real-name account contract extension from Nonghyup Bank.

An exchange official said, “The Nonghyup Bank proposal was sudden in a situation where we knew we only needed to establish travel rules until March of next year. I am worried that other banks will not require restrictions on coin deposits and withdrawals,” he said.

In addition to the ‘travel rules’, there are other tasks remaining in the exchange to receive a real-name account. This is the so-called ‘Job Coin Cleanup’. The bank will give a penalty if the number of coins handled in the evaluation of the exchange is large. As the exchange prevails in a lawsuit between a coin issuer and the exchange that was recently delisted by the exchange, it is expected that the number of delisted coins will increase at a faster rate. The court rejected Pika Project’s recent application for an injunction to suspend the delisting effect on Dunamu, ruling that ‘it is justified for the exchange to delist the problematic cryptocurrency’.

Reporter Na Geon-woong wasabi@mk.co.kr

[ⓒ 매일경제 & mk.co.kr, 무단전재 및 재배포 금지]