The South Korean cryptocurrency exchange Upbit will prohibit the trading of fiat currencies to 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 problem is the impossibility of securing uncontrolled trading in 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 online banks. Therefore, Upbit warned foreign traders that they should withdraw their fiat currencies from the exchange by July 24. Other Korean exchanges, Korbit and Coinone, began to demand from users a mobile phone number, which must be specified 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 customers. In January, the South Korean Ministry of Finance proposed a 20% tax on income from digital assets. 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, decreased by 60-70% due to pressure from local regulatory authorities. 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) recovered from Bithumb about $ 70 million. NTS accused the exchange of not retaining taxes from foreign clients who made profit from cryptocurrency transactions.
