The Korean Exchanges located out of South Korea are finding it difficult to conduct business in the country. In the past months, the industry is seeing a negative trend since there is no regulatory certainty in South Korea. Many of the crypto exchanges are losing international clients. To save their businesses, they are forced to only focus on their business in their home market. One of the spokespeople for an exchange with the name Upbit said that since they are not able to offer fiat trading using the baking accounts, it is becoming difficult to offer their customers services beyond two years period. But, Upbit was one of the lucky few who have been able to find some solution to the problem. It has signed an agreement with K Bank, a digital bank that would allow fiat trading for the exchange’s local clients in South Korea.
Even though the agreement has allowed the platform to solve the issue of the clients from South Korea, it won’t serve any purpose for the users outside of the country. It is because non-Koreans cannot create their account with a digital bank located out of South Korea based on the current banking regulations. The new agreement was created as the old partnership of Upbit with the Industrial Bank of Korea is about to come to an end. Upbit had already instructed its non-Korean clients to withdraw all of their funds from the account by 24th July 2020. The Upbit further added it wanted to ensure regulatory compliance, but because the non-Korean citizens cannot use K Bank for trading was not taken into consideration when creating this partnership. Many other cryptocurrency exchanges in South Korea like Korbit and Coinone are using phone verifications to authenticate traders. They are required to register themselves using a South Korean mobile phone number, which automatically eliminates the traders from other countries and prevent them from using their services.
Upbit is also forced to take 22 percent of the total profit of the residents outside of South Korea when they withdraw funds from their platform. It was done so that the exchange could pay all the necessary taxes once the government starts to implement the tax structure that they have been planning for a while now. The Legislature has decided to impose a 20% tax on earning through cryptocurrencies, but there has been no official announcement till now. The tax scheme is almost the same as the basic tax rate in the country, but it has to be filed manually by individuals. The tax scheme once announced, will require further approval by the government. The crypto exchanges are worried that until South Korea’s Ministry of Economy and Finance does not make anything official, it will be difficult for companies in the industry to know how it will impact their business in the long run. All the crypto exchanges are waiting for an official word so that they can start offering their services to a much wider audience and ensure parity with other crypto exchanges around the world.