South Korean cryptocurrency exchange, Daybit is shutting its local operations, citing the harsh requirements of the anti-money laundering laws, The Korea Herald reported on Sunday.
The exchange, which is operated by Chain Partners, is planning to terminate its entire operations by June 1.
“The operation of Daybit will be halted in phases by June 1 as we are unable to provide normal transaction services amid the toughened regulatory environment after the Act on Reporting and Using Specified Financial Transaction Information went into effect recently,” the crypto exchange operator said.
Regulations Are against the Crypto Industry
Daybit is not the first and probably not the last South Korean crypto exchange to shut. Earlier this month, OKEx closed its South Korean operations due to regulatory and business difficulties. CPDAX, another such exchange in the country, also decided to shut its doors for similar reasons.
While the big four crypto exchanges in the county, Upbit, Bithumb, Coinone, and Korbit, are flourishing, the smaller ones are struggling, mostly in finding banking partners.
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“There are more than 10 exchanges that completed (information security management systems), which is one of the requirements for exchanges that hope to be registered with the Financial Intelligence Unit, but they are having difficulties to get real-name accounts from local banks,” an anonymous insider told the local publication.
Daybit’s banking partnership contract with Shinhan Bank is ending before June.
“Out of more than 100 exchanges, we are very likely to see more closures,” the insider added.
South Korea has revised the laws around financial transactions reporting, and it has mandated that all crypto accounts must be linked with bank accounts in the holders’ real names, which should be completed before the deadline of September 24. However, the lenders find the screening process difficult.
“When the crypto market is bullish, partnering up with crypto exchanges might look like good business but at the moment, especially when markets fluctuate like recently, the risks seem to outweigh the small transaction fees that banks could earn from the partnership,” a South Korean bank official told The Korea Herald.