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Is South Korea’s Crypto Exchange Market on the Verge of Collapse?

Benson Toti

If you’re just awakening from a year-long coma, the crypto markets have been in freefall for months, and the low prices and lack of investor participation are wreaking havoc on all but the industry’s biggest projects and businesses. We’re starting to see this sort of havoc play out in South Korea, where multiple SK crypto exchanges have been censured for various acts of fraud – mostly for the faking of transaction volume.

Clearly, this is illegal, but it speaks to deeper issues within the South Korean cryptocurrency exchange industry. Why would an exchange create phoney trades unless they were trying to pretend to have more business than they had, hoping the action would attract real customers? A couple of the exchanges (the complete list being Bithumb exchange, UpBit exchange, Komid exchange, and Coinzest exchange) also created inauthentic cross trades to reap superfluous trading fees, at the expense of their existing customers. All is not well in South Korean crypto.

Bitcoin price crash

Poring/Shutterstock. What happens to South Korean crypto culture if no domestic exchanges remain?

It’s important to note that South Korean exchanges’ very problem may be due to their regionality. The world’s biggest crypto exchange is still Binance. And, while Binance isn’t doing business on the level it did in late 2017, it has managed to continue to absorb business, while smaller, older, less advanced regional exchanges lose customers. Bithumb, the largest crypto exchange in South Korea, is still only 98 out of 100 when compared with the trading volume of all other global exchanges. The other three SK exchanges we mentioned earlier don’t even crack the top 100. It’s hard to keep the lights on and pay staff when business is that dire.

It’s too soon to say if this low ebb represents the end of South Korea’s domestic cryptocurrency exchange markets. The Korean government has already been very strict about crypto regulation, and it’s easy to imagine them cracking down even harder in the wake of these allegations and indictments.

It may be that one or more of these South Korean exchanges survive through these hardships. If the market returns to former health, this consolidated South Korean exchange market could provide the same level of customer satisfaction, without all of the market redundancy. Alternately, these events could pave the way for wider adoption of decentralized exchanges, which don’t have the same fraud potential as this generation of SK exchanges.

Whatever the case, there are too many corrupt exchanges today, competing for too little business. Regional markets will continue to suffer. When and if the crypto markets bounce back, the resulting industry won’t resemble that of today.

Featured image: Lukasz Stefanski/Shutterstock


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