A new report from Business Korea has claimed that the vast majority of domestic cryptocurrency exchanges are on the edge of bankruptcy due to low transaction volume.
“Only five or six South Korean exchanges rank among the top 100 in the world in terms of transaction volume,” the report says. “It is no exaggeration to say that 97 percent of domestic exchanges are in danger of going bankrupt due to their low volume of transactions.”
While the report did not provide hard data to back up this claim, at least one cryptocurrency exchange has already shut down this year because of a dropoff in cryptocurrency trading volume: a representative from Coinnest told CoinDesk Korea that its shutdown was “a natural result of a decrease in trading volume.” The representative also cited “regulatory issues and business decisions.”
Low volume at home is causing crypto startups to seek listings on foreign crypto exchanges
Additionally, low transaction volume in South Korea has allegedly caused a growing number of South Korean crypto startups to list their coins on overseas exchanges. The report also claimed that “foreign [cryptocurrency] exchanges have opened the Korean won money market to attract South Korean cryptocurrency projects.”
The report asserts that so far, both Binance Labs and BW.com have shown particular interest in attracting these South Korean projects. BW.com, which has already listed Ziktalk, Storichain, Payexpress and Sigma Chain, is also “planning to absorb domestic cryptocurrency investors by opening the won market by the end of this month.”
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Additionally, “Binance Labs, are directly accelerating Korean blockchain projects to attract Korean startups.” Singapore-based Bitholic listed BOScoin, a Korea-based cryptocurrency, in June.
”[Tough] domestic cryptocurrency exchange market conditions” paint a very different picture than two years ago
There are a number of other “tougher domestic cryptocurrency exchange market conditions” that are allegedly contributing to the efforts to list abroad, including the fact that “investors cannot make or withdraw deposits in the Korean currency at Korean exchanges.”
Additionally, 200 smaller exchanges “cannot open real-name virtual accounts,” which prevents crypto holders from having access to investor protection.
The report’s claims paint a picture of the South Korean cryptocurrency market that stands in stark contrast to the country’s cryptocurrency industry in late 2017 and early 2018.
In December of 2017, it was estimated that 20 percent of the world’s Bitcoin trading volume came out of South Korea; the crypto mania was so intense in the country that Prime Minister Lee Nak-yeon referred to Bitcoin trading as “some serious pathological phenomenon.”