Crypto.com and other major international cryptocurrency exchanges are facing significant regulatory hurdles from South Korean financial authorities, which resulted in reinforcing a domestic monopoly and limiting market competition.
In April, Crypto.com, a U.S. cryptocurrency exchange that had announced its entry into the S. Korean market, has not been able to commence operations following an emergency on-site inspection by financial authorities.
Following Binance, the world’s largest exchange, Crypto.com is also facing difficulties entering the S. Korean market. Therefore, some critics contend that the financial authorities’ ‘crypto isolationism’ is reinforcing a monopoly by domestic exchanges, thereby preventing users from trading at lower fees.
According to the cryptocurrency industry, Crypto.com has indefinitely postponed the launch of its S. Korean cryptocurrency trading app, which was initially scheduled for April 2024, and has yet to set a new release date two months later. An industry insider noted, “The company is working with advisors and experts to find a way to obtain business approval from financial authorities.”
Founded in 2016, Crypto.com is a cryptocurrency exchange headquartered in Switzerland. It is the world’s 10th largest exchange with 80 million users globally and a cumulative trading volume of $10 trillion since its inception. It has partnerships with several domestic companies, including Samsung Electronics and Naver Line, and is also a well-known sponsor of major sports teams. Crypto.com owns the ‘Crypto.com Arena,’ home to the NBA’s LA Lakers.
On Apr. 2, Crypto.com held a press conference to announce its plans to enter the South Korean market. CEO Eric Anziani stated that operations would begin on Apr. 29 as a coin market exchange where users can charge Bitcoin and trade cryptocurrencies and non-fungible tokens (NFTs).
Previously in 2021, Crypto.com acquired the domestic coin market exchange OKBit. To obtain the Virtual Asset Service Provider (VASP) qualification granted by financial authorities, Crypto.com planned to start operating under its brand after acquiring the management rights of a local exchange and undergoing two years of preparation.
However, three weeks after this announcement, on Apr. 23, the Financial Intelligence Unit (FIU) under the Financial Services Commission conducted an urgent on-site inspection related to anti-money laundering. The cryptocurrency industry interprets Crypto.com’s inability to start services since the FIU’s investigation as a de facto obstruction by financial authorities to entering the domestic market.
In order for domestic exchanges to continue operating in S. Korea, they must undergo VASP renewal screening in the second half of this year. The Financial Services Commission introduced the VASP registration system in 2021, requiring qualification renewal every three years. Crypto.com is reportedly more concerned about losing its business qualification in the screening scheduled for September than launching its coin market trading services immediately.
Crypto.com is not the only overseas exchange that has faced obstacles from financial authorities while attempting to enter the South Korean market. Binance acquired a stake in the fifth-largest domestic exchange, GOPAX, early last year but has not received approval for business changes from the Financial Services Commission for over a year and a half.
However, as overseas exchanges are blocked from entering the domestic market, a few local exchanges enjoy a monopoly. According to CoinGecko, a cryptocurrency statistics analysis platform, Dunamu, the leading domestic exchange, holds a 65% market share. The second-largest exchange, Bithumb, maintains a market share of around 30%.
