Over half of South Korean crypto exchanges have failed to repay investors’ money after they become defunct, according to a joint study by financial authorities. The study comes amid growing interest in the digital assets market in Korea, which is also estimated to be among the top crypto markets in the world.
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According to the study by the Financial Supervisory Services (FSS) and Korea Financial Intelligence Unit (KoFIU), seven out of 10 cryptocurrency exchanges failed to return investors’ money after they suspended operations or shut down completely.
Exchanges fail the basics
Apart from failure to reimburse funds to investors, a majority of the exchanges deny their investors the basic right to information. According to the study, six of the failed exchanges did not notify investors of the impending closure or suspension.
“And even if they did, just one or two employees were tasked with giving back customers’ money, causing extreme inconvenience for customers.”
FSS.
Korea is estimated to be one of the biggest cryptocurrency markets in the world. During the first half of 2023, over 10% of the entire population or over six million Koreans were active on cryptocurrency markets via registered exchanges during the first half of 2023.
70% of Korean Crypto Exchanges Fail to Repay Customers After Closure, Regulator Says: A joint research effort by Korean regulators — the Financial Supervisory Service (FSS) and Korea Financial Intelligence Unit (FIU) — has revealed that seven out of 10 cryptocurrency… $BEYOND pic.twitter.com/hnbUd7AmpX
— Daniel (@DanielWang69) June 8, 2024
In addition to major cryptocurrencies like Bitcoin, Koreans also trade some smaller and riskier cryptocurrencies.
The FSS has indicated it will collaborate with other financial authorities to “enhance rules on financial firms that plan to close down.” This is also part of the authority’s broader initiatives towards investor protection.
“We come up with relevant guidelines, and will continue to focus on rooting out illicit activities in the growing digital asset market,” said the FSS.
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According to The Korea Times, the FSS called on CEOs of digital asset service providers to ensure strict compliance with the virtual asset protection laws, which are expected to come into effect in July.
In February, the KoFIU announced plans to tighten screws on cryptocurrency exchanges for both existing and new entrants.
Cryptopolitan reporting by Enacy Mapakame
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