South Korean Crypto Exchanges Grapple with New Supervisory Fees
Major cryptocurrency operators Upbit, Bithumb, and Coinone are now required to pay a supervisory fee as part of the newly enforced Virtual Asset User Protection Act.
This fee, part of revised regulations announced by the Financial Services Commission (FSC) on July 1, will support inspections by the Financial Supervisory Service (FSS) starting next year. This move brings virtual asset operators under the FSS’s inspection scope in line with the Virtual Asset User Protection Act. The supervisory contribution for these operators is determined by the contribution rate based on the operating revenue of the previous fiscal year. This unexpected financial obligation could pose challenges for specific platforms.
This New Fee Poses a Challenge for Crypto Exchanges
Using the 2024 contribution rate of 2.686818 per 10,000 won of operating revenue, Upbit’s contribution is approximately 272 million won ($199,388), while Coinone and Gopax are expected to contribute roughly 6.03 million won ($4,422) and 830,000 won ($608), respectively.
Notably, Korbit is excluded from the supervisory contribution target due to its operating revenue of approximately 1.7 billion won ($1.2M) last year. This fee is a return for the supervision and services provided by the FSS. Only businesses with an operating revenue of 3 billion won or more are subject to this fee.
However, this new requirement poses significant challenges for many virtual asset exchanges. Most, except for Upbit and Bithumb, continue to suffer operating losses. Despite these losses, exchanges like Coinone and Gopax will still have to pay the supervisory share, adding financial pressure to their struggling operations.
Crypto Exchanges in South Korea May See Yet More Regulatory Oversight
Initial industry predictions were that the imposition of supervisory fees on virtual asset operators would be deferred. However, the decision to impose these fees was expedited due to the imminent inspections by the FSS following the enforcement of the Virtual Asset User Protection Act.
To comply with South Korea’s new crypto laws, 20 local exchanges are teaming up to review over 1,300 digital currencies in the next six months. This is a huge step towards more regulation in the crypto industry in South Korea. As things continue to unpack, it’s unclear how these changes will affect the future of crypto exchanges in the country.
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