South Korean cryptocurrency exchange Upbit will ban fiat currency trading from foreign traders and will focus on serving local users due to regulatory uncertainty.
Upbit, a South Korean exchange, is concerned that the marketplace is having difficulties in bringing digital and fiat currency trading to international users. The key issue is the impossibility of enabling uncontrolled trading of fiat currencies using verified bank accounts. Upbit announced that it has entered into a partnership with the Internet bank K Bank. This will allow fiat trading to resume for South Korean users, but will not be available to traders in other countries.
According to the banking regulation of South Korea, citizens of other countries are prohibited from opening accounts through Internet banks. Therefore, Upbit has warned foreign traders that they must withdraw their fiat currencies from the exchange by July 24th. Other Korean exchanges, Korbit and Coinone, began to require users to provide a mobile phone number, which must be provided during the authentication process. Thus, exchanges are trying to identify traders from other countries.
Since the beginning of June, Upbit users who are not South Korean citizens have been “giving away” 22% of their profits to the exchange for withdrawing money. This was necessary so that the platform could easily pay taxes on the profits of foreign clients. In January, the South Korean Ministry of Finance proposed a 20% tax on digital asset income. However, the official legislation on taxation of income received from the turnover of cryptocurrencies has not yet been presented. Therefore, it is difficult to assess how the new tax regulations in South Korea could affect local cryptocurrency exchanges.
In the spring, it became known that since 2018, the trading volumes of many South Korean exchanges, including Upbit and Bithumb, have decreased by 60-70% due to pressure from local regulators. Due to the lack of clear regulation of the cryptocurrency industry in South Korea, local cryptocurrency exchanges began to lose international users, so now they have to focus on local traders. In addition, in December, the South Korean Internal Revenue Service (NTS) collected about $ 70 million from Bithumb. NTS accused the exchange of failing to withhold taxes on foreign clients who made profits from cryptocurrency transactions.