USD 1.8M Worth of Crypto & Fiat Remains in Limbo in South Korea

So far just under half of all the crypto and fiat from the South Korean exchanges that closed down last month has been recovered – converted to fiat and withdrawn through banks or transferred to other exchanges – but USD 1.8m still remains unaccounted for two weeks post-shutdowns. 

As previously reported, scores of exchanges were forced to close on September 25 after the nation imposed some of the strictest rules in the world on trading platforms. They were forced to obtain information security management system (ISMS) certification from the government’s IT agency in order to offer crypto-to-crypto trading, and real name-authenticated banking service partners if they also wanted to offer fiat trading.

Of this number, the Segye Ilbo reported, 13 platforms “tried to obtain ISMS certification, but failed to do so” – and thus were forced to close. Per figures from the Financial Intelligence Unit (FIU), a total of USD 3.5m worth of fiat and coins had been held on these platforms.

But now, over two weeks later, only USD 1.76m has been recovered.

The FIU says it is working with investigative agencies in “response to concerns” that some exchanges may seek to avoid refunding their customers “as they go out of business.”

Exchanges that closed on September 25 were told they must remain operational for 30 days to refund their customers – with customers also told to hurry up and withdraw their funds from these platforms.

The media outlet pointed out that “some exchanges” had experienced “server issues” that had caused delays.

But the FIU could be set to tackle a much thornier problem: namely “planned bankruptcies” – whereby companies attempt to use the legal system to declare themselves unable to refund their customers.

No such bankruptcies have yet been reported to the financial authorities, but the fact that so much crypto and fiat still remains unclaimed or unrefunded will be a major cause for concern.

A total of 36 exchanges closed down completely on September 25, including the aforementioned 13 that had failed to obtain ISMS certification. Twenty-three others did not even apply for ISMS certification – creating another possible minefield of unrefunded crypto and fiat.

Only two trading platforms (Upbit and Korbit) have thus far been granted FIU operating permits for fiat markets, with rivals Bithumb and Coinone also waiting to hear the results of their own applications. 

Another group of 25 exchanges obtained ISMS certification, and are thus allowed to offer crypto-to-crypto services.

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Learn more:
– Deposits on ‘Big Four’ South Korean Exchanges up 1,368%
– Trading Volumes Collapse at Most S Korean Crypto Exchanges, New Restrictions Confirmed

– NFT Tax & ‘Practical Difficulties’ with Crypto Tax In Spotlight In S Korea
– South Korean Regulators Deserting Jobs for Posts in Crypto, Fintech and Finance