In a shocking revelation, South Korean financial authorities disclosed that following the suspension of operations in the country, about seven out of ten cryptocurrency exchanges operating in the Asian nation failed to return investors' funds.
This disclosure, made in a joint research project by the Financial Supervisory Service (FSS) and Korea Financial Intelligence Unit, was reported by a local media news outlet and has since made the headlines within and beyond the country’s borders.
Intriguingly, not only do the crypto exchanges fail to reimburse the stranded investors, but these exchanges also refuse to give the customers prior notice of their plans to shut down or suspend business within the country, making the event more devastating for the investors and culminating in adopting stricter trading platforms regulations in South Korea.
South Korean Robust Market And The Pressing Need To Protect Investors
According to 2023 market participants statistics, 10% of the Asian nation population, representing about 6 million people, are active crypto traders who have participated in digital assets transactions via trading platforms operating within the country's jurisdiction in 2023's first six months.
Considering the population size and actively involved population size in crypto dealings, the South Korean cryptocurrency market is diverse and dynamic, with traders frequently patronizing proven digital assets like Bitcoin (BTC), Ethereum (ETH), etc. At the same time, some with not-too-buoyant financial backup resorted to trading smaller cryptocurrencies.
Unfortunately, this tendency to invest in these lesser cryptocurrencies increases the risk of financial losses for investors owing to their lack of stability and increased rate of failures.
FSS Unveils Plans For Customers' Security
Following the need to protect South Korean customers, the FSS disclosed that it is working on relevant guidelines that could help regulate illegal activities within the country's fast-growing digital market.
In addition, the South Korean regulatory body noted that it is partnering with other relevant financial bodies within the country to enforce stricter regulations in the procedures involved in financial companies' closures.
Notably, the FSS emphasized that to be able to operate within the country's borders, all digital asset service providers would have to strictly comply with the new virtual asset investor protection law, which will take effect in July 2024.
The FSS's recent plans, if implemented, will go down as a step in the right direction to prevent crypto investors from losing significant funds stemming from trading platforms' mismanagements.
